3 Investment Strategies Teenage Investors Should Stay Away From

Investing is a great way to build wealth, whether you’re an experienced investor or a teenager who’s just learning how to buy and sell stocks. It can feel overwhelming to dig through all the investment information out there and know what to believe.

We’re here to help teenage investors start their investment portfolios while also avoiding a few common mistakes.

3 Investment Strategies Teenage Investors Should Stay Away From

The investment steps you take now as a teenager can pave the way for a secure financial future. Now is the time to learn how to research and choose the best investments to match your financial goals.

Here are three investment strategies teenage investors should stay away from:

1. Ignoring Retirement Investments

It can be difficult to imagine retirement when you’re still in your teenage years. Your immediate goals might seem way more important, including funding college, buying a car, or even going on a dream trip.

The reason to begin thinking about investment funds now is you can significantly increase your returns the earlier you start funding a retirement account. While you might not yet have access to a traditional IRA account until you’re working in a career, you can start a retirement account through a Roth IRA.

Funding your retirement account now means you can take advantage of compounding interest. The earlier you begin investing in your retirement, the more money you’re likely to have at the age of retirement without having to invest as much initially.

2. Putting Off Investing

It might be tempting to wait until you have a steady income to begin investing regularly, but this can be a mistake. With compounding interest, the best time to start investing is now. Think of it as a bill, but instead of paying rent or a credit card, you’re paying yourself.

Automatically move a certain percentage of your allowance, birthday money, or paycheck from an after-school job to an investment fund. Allocating even a small amount each month can make a difference in your financial future.

Investing any money you receive after graduation can also be a great starting point for your investment strategy. This also helps build good financial habits that will allow you to increase your investments as your income increases. If you’re not yet comfortable trading stocks, starting with a high-yield savings account might also be an option.

3. Focusing Only on Stocks

Stocks can be exciting and often get the most attention when it comes to financial investments. Individual stocks, however, have a higher risk than exchange-traded funds (ETFs) or index funds. An ETF is a diversified collection of investments that trade similarly to stocks but allow you to spread your risk across multiple investments.

A few great index funds to consider include the S&P 500 or the Dow Jones ETF. While teenagers might have more room for riskier investments in their portfolios, it’s still usually a good idea to create a foundation of safer investments first.

If you’re under age 18, you’ll likely need a parent to open a brokerage account for ETF investments. Some brokerages also allow parents to open separate teenage investment accounts under their primary investment account.

Additional Investment Tips for Teenage Investors

In addition to the three investment strategies teenage investors should stay away from, here are a few tips for newer investors:

• Learn how to research a company: Learning how to analyze a company’s financial performance provides you with the information you need to make informed decisions about the stocks you buy.
• Diversify your investment portfolio: It’s never too early to start diversifying your investment portfolio. Once you have a good foundation of safer investments, such as index funds, you can invest in more volatile investments, including cryptocurrency.
• Ask questions: Asking questions about investing is a great way to learn more about the market. Gather information from parents, friends, extended family members, and other investors to get a wide range of information on all types of investments.
• Practice investing: If you’re not yet ready to trade stocks with your money, practice using mock investments. Research businesses, follow their earnings reports, and then measure your overall performance if you would have invested in that stock.
• Remember, returns are not guaranteed: No investment guarantees returns. Investments that pressure you to buy now or guarantee you’ll make money are unlikely to be legitimate. Do your research before investing with a brokerage or funds.
• Allocate time to invest: School, friends, and extracurriculars can make it difficult to find time to invest. Setting aside some time to research potential investments and review your current strategies is a great habit to start.

Every investor starts somewhere. Showing interest in buying and selling stocks and funding your retirement is a great start to a secure financial future.

How Old Do You Have To Be To Invest in Stocks?

You have to be at least 18 years old to buy or sell stocks. However, you might be eligible to open up a custodial account with a parent. Once you reach age 18, the account reverts to you, and you can trade on your own, without your parents.

How To Manage Fees as a Teenage Investor

Choosing the right brokerage account is important to help you control costs as a teenage investor. Trade fees and account minimums can make the barrier to investing difficult for teenagers.

Some online brokers don’t charge fees to buy or sell stocks as long as you stay within a minimum earning or investment level. Some brokerages might also waive minimum requirements for teenage investors.

It can also be helpful to find brokers that sell portions of stocks or investments. Otherwise, you might be limited to the stocks you can buy based on the amount you have to invest. By investing in fractional shares, you’ll receive fewer returns, but you won’t have to save as much to invest.

Want to learn more about trading stocks and real estate? Sign up for a free Infinity Investing workshop, where you can learn tips and tricks for investing. You can also create a free membership account to access resources and courses.

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