How to Invest in Stocks as a Teenager the Right Way

how to invest in stocks as a teenager

If you wish to learn how to have a passive income, the best way is to start early and learn how to invest in stocks as a teenager. So what does that mean? Investing in stocks refers to purchasing shares of ownership in a company. This way you can own small shares known as the company’s stock. The end goal is to see the company growing and for you to receive a larger revenue each year. Another way of making money from stocks is to sell your shares to other investors when they become more valuable.

How to start investing in stocks as a teenager?

People who invest in stock must learn the basic rule: patience. It’s a long process and the results are visible in time, with calculated moves. If you want to start, the best way is to put money aside in an investment account from which you can start investing in shares of stock or stock mutual funds.

For you to learn the trade, some brokers can offer you paper trading, which allows you to use simulators for buying and selling. This way you can learn how to invest without any risks.

How to invest in stocks
Photo by Burak the Weekender

Open an investment account

For beginners who want to start in the stock market domain, they need to start by opening a special account named brokerage account. They are specialized companies such as E*Trade or TD Ameritrade who offer these accounts.

Opening this kind of account usually takes from a few minutes to a maximum of a few hours. It can be funded via direct wiring money, by mailing a check or EFT transfer. After opening a brokerage account, the next step is to find a suitable broker for you.

What types of accounts can you choose?

Most importantly, you should first decide what kind of account you need. For beginners who just want to learn the trade, they can choose between a normal brokerage account or an individual retirement account (IRA).

Both allow you to purchase stocks, mutual funds, and ETFs. The main difference between the two types of accounts is that the IRA account has a contribution limit. Also, the IRA account is recommended for people who wish to build a “retirement nest egg”.

For this type of account, you can choose two versions, traditional IRA accounts, and ROTH IRAs. Besides these, there are personalized accounts for SMEs and freelancers. One of the best advantages of IRAs accounts is the amazing tax advantages. On the other hand, a con might be the fact that you can withdraw the funds after a longer period of time.

Another tip for investing in stocks is to have a diversified portfolio. This allows you to gain interest from multiple sources and to easily move the funds when some shares have their value raised or decreased.

Photo by Burak the Weekender

Other tools for investing

Along these accounts, there are additional tools that can simplify your learning process. There are many apps that allow people to invest in stocks with a simple click, without any other complications. They are usually personalized to users’ needs. They can have sections such as free guides to learning the trade, open chats for direct discussions with experts and many more other options.

A great app that teaches you how to invest is Tornado. It helps people to invest in individual stocks and EFTs that trade on the US stock exchanges. Its uniqueness consists in its new approach to learning from other experts instead of theory. Instead of technical methods, the users can search for what other subscribers are buying and selling. They can also receive real-time advice from Tornado leaders and learn from the courses offered on the platform.