With so much attention focused on the stock market in recent years, now is just the time for teenagers to learn the importance of saving, investing and financial management. In addition, it gives teens an opportunity to earn money and save for their future education. However, being a teenager, you need to get into some nitty-gritty details about how to invest. For example, teenagers below 18 years will need to register their investment account under an adult’s name. Below are the stock investment tips for teens. You need your parent or guardian In most nations, you need to be 18 or above to hold a stock account. If you are a minor, you need your parent or guardian to register a stock investment account for you. This is called a custodial account which allows you to make the investment decisions, but the contract will be in the name of your parent or guardian. Once you are 18, you can transfer the account under your name.
Research brokerage firms before investing
If you want to invest in the stock market, you need to choose a stockbroker. Most people choose brokers that their friend or family members use or from the ads they watch on TV. But with a careful analysis, you should be able to find the best broker for you. You can choose from different methods of trading- via phone, in-person, or online. Trading online is the best option for smart investors which will generally cost you between $7 – $15. On the contrary, other methods may cost you anywhere between $25-$100. Some firms charge you higher fees for their personalized research or excellent advice. Though it is safe to buy from them, don’t pay $59 a trade and more for research and advice. Choose brokers that are geared more for beginners such as Ameritrade. If you go with brokers that are geared for professionals, they will offer you some advanced tools to trade but you may not be comfortable with those tools. Online brokerage firms like TD Ameritrade, Fidelity, etc, are very easy to use and their trading commissions are quite reasonable.
Look for stocks that are attractively priced
Research your stock picks before investing in them. Don’t buy stocks that are too expensive, instead opt for the ones that are attractively priced in your range meaning you can afford to buy at least 100 shares of them. Look for stocks priced $10 or less and carefully analyze them to ensure they’re worth purchasing.
Avoid trading too often
Young investors often buy and sell their shares too much. They get encouraged by TV or a friend to sell their current shares and invest that money with a new one. Finally, the only person that benefits from this is your broker, who charges you trading fees. Trading frequently is also tax inefficient, since you end up paying higher short-term capital gains tax instead of the lower long-term capital gains tax.
One emotional detrimental to young investors is loss of patience. You must be careful while buying the shares. However, losing patience whenever the stock market falls never solves your problem. Investors who lose patience quickly often end-up buying high and selling low.
Beware of Scammers
Scammers are everywhere. They try to fool you, but with little commonsense you should be able to identify the warning signs of scammers. Generally, stock markets offer you a return of 10% for a year. If a company guarantees you 50%+ returns a year, beware they are the signs of a scam. Also, if you come to know about the investment opportunity through an email or other sources, pay attention to find who is behind the scenes?
Visit professional websites
Get into the habit of checking out some of the more professional websites like MSN Money, Yahoo Finance, Investopedia and others. They provide simple instructions and help you with procedures and terminology. Some of these websites will have advertisers who are worth contacting also. Attend any free seminars you can, just be careful and don’t push yourself to do something you really don’t need. Most schools like New York institute of Finance offer online courses in finance and the mechanics of the investment markets. So if you have time take the course. And when you are ready to invest/trade, try some paper trading to check your skills without spending your money.
Avoid fear and greed
Don’t be greedy and jump on the decision to buy the stock just because others are doing well with it. This is because by the time you invest in the stock, its price has moved up so much that it has become overvalued. Fear is another powerful emotion for investors that results in poor investment. For instance, you buy a good stock, but after a few days you notice that the stock falls significantly temporarily, and then you think of quickly selling the stock. Though the stock is cheap, you should think of buying more than selling them for low price due to fear of loss. Hence, don’t let fear and greed negatively affect your investment decisions.
Brianne Walter is a freelance journalist who has been writing about mobile technology, customer relationship management and women’s health for more than a decade. These days she is busy to contributes on getamplify