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How to Start Investing for Teens

Lifestyle

How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.

— Robert G. Allen

My dad first introduced me to the stock market when I was in 6th grade. Ever since then, I have been drawn to the fact that it was initially created by the middle-class to attain financial freedom. The first ever city to create a publicly traded stock was Amsterdam when the East India Company went public in 1661. Soon after, the first American stock went public, called the Nasdaq.

Decide what kind Of Investor You Are.

The first step to investing is deciding what you want to get out of it. The best way to succeed in the stock market is by knowing yourself. If you know that you are a person who usually likes the safest route, you should go with things like ETFs, bonds, mutual funds, and shares. If you know you are a person who enjoys a bit more risk in your life, you should go with things like options. You are also going to have to decide how long you can keep your money in the market. Whether that is 1 day, 1 year, or 30 years, the stock market is a perfect place to learn and succeed.

Open a Brokerage

The second step to financial freedom is opening a brokerage. When it comes to choosing a brokerage, you want to keep two things in mind: ease of use, and commission/ fees. A good option for most people starting out investing is Robinhood as it is extremely easy to use and has little to no learning curve, and there are 0 commissions. Another good option containing 0 commission fees is Webull; however, a learning curve is present. Finally, the last public brokerage to choose from is TD Ameritrade. TD Ameritrade also incorporates no hidden fees/ commissions, but is harder to learn to use compared to an app like Robinhood. Pick a brokerage and stick to it.

Long Term Shares

Holding shares is on the safer side of the stock market. When picking companies to invest in for the long term, it is important to pick them carefully. A good way to pick these companies is to observe what companies you use daily that have also truly changed the world. Just to name a few, Apple, Microsoft, Google, and Tesla are revolutionary companies. Additionally, you want to look at things such as earnings to see whether or not a company truly has a loyal customer population. If a company has fluctuating earnings, it is usually best not to invest in it as it shows signs of a risky investment. It might also benefit you to learn how to look at things such as logs and charts to ensure the company is secure from an economical perspective. Some companies pay share holders a dividend or a portion of their profits, which might start adding up in the long term, helping to grow your account. Some of the biggest dividend yielding companies include AT&T, Lumen Technologies Inc, and Vornado Realty Trust. Finally, sticking to the basics and remembering your long-term goals will ensure holding shares will benefit your investment portfolio.

Option Trading

Option trading is on the riskier side of the stock market. It requires predicting which way a stock will go in a short period of time through things like charts, patterns, earnings, and news. The formal definition of an option is a contract which conveys to its owner, the holder, the right, but not the obligation , to buy or sell an underlying asset or instrument at a specific strike price on or before a specific date, depending on the style of the option. A simpler definition is betting on whether a stock will go up or down and making a profit in between. Options can be extremely beneficial to an individual's portfolio as they can be compounded very easily. There are two types of options: puts and calls. When buying a call, a trader is betting on the stock to make a move to the upside because of things like positive news regarding the company, traceable bullish patterns in the chart, being overvalued, being oversold or overbought, and beating predicted earnings. When buying a put, a trader is betting on the stock to make a move to the downside because of things like traceable bearish patterns in the chart, bad news coming out about the company, being oversold or overbought, and coming short of predicted earnings. When trading options, it is important to have stop losses set. If done properly, options can help compound your portfolio.

The Bottom Line

The bottom line to succeeding in the stock market is this: set a budget on how much you can set aside to invest per month, manage your portfolio in a responsible manner, stay focused on your long-term goals, and always remember that time in the market is always better than timing the market. If you are interested in learning how to start investing but are not able to bring forward the capitol to do so, paper trading is always a good idea as well. With paper trading, you can learn how to properly and safely trade, without having to worry about any repercussions such as losing large amounts. In conclusion, investing is a necessary skill that all teenagers/ adults should learn in order for them to be able to achieve financial freedom and never have to worry about money again.

Nik Yelemali
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Nik Yelemali is a sophomore who is passionate about investing, business, and crypto. When he is not writing about his interests, you can find him playing sports, hanging out with friends/ family, and playing videogames.