From a young age, children are taught the importance of saving money for big expenses in the future. Whether that money is going towards college tuition or a first-time car payment, most everyone would like the financial freedom to make those purchases. For anyone who currently has a job or a large sum of cash savings, investing in a stock portfolio is a great way to make your money work for you and to accumulate wealth. The S&P 500, which is widely regarded as the best indicator of stock market performance, has seen an average annual return of nearly ten percent since it was created. Many people think stock investing is unnecessary or even too risky, especially at a young age. However, with a well-diversified portfolio featuring different sectors of the economy, the chances of succeeding are high. It can also be an important tool for learning how to manage your finances while you can still make simple mistakes. Following the ten percent annual return means your investment will likely double in a little over seven years. There are many different strategies for picking the right stocks or a collection of them called an index fund. However, the first thing you will need to do is open a brokerage account with help from your parents if you are under the age of eighteen.
There are tons of online brokerages to choose from, but the best ones for high schoolers with a limited amount of money will offer fractional shares. This means that users can afford to buy stock into companies with very high valuations like Amazon, which would usually set you back a few thousand per share. For example, if a fractional share of Amazon is bought with one hundred dollars, that will equate to three percent of one whole share. The best brokerage accounts for young investors that offer this feature are Charles Schwab, Fidelity Investments, and Robinhood (in no particular order). All of these websites offer professional guidance on how to invest and feature a colorful display that is easy to understand for those new to the application. Because of age restrictions in the state of North Carolina, minors will have to open what is known as a “guardian account” with a parent as the primary owner. This will be easy if parents already have their own brokerage account, but may take some convincing if they do not. Nevertheless, you will still be able to make your own trades and decisions, but your parents will have control over the account. Once a child turns eighteen, they can easily transfer the savings to their own primary brokerage account without any additional fees.
According to experts, the best companies to invest in are tech companies such as Facebook, Apple, Microsoft, Netflix, and Google. These stocks have a lot of room left to run and are projected to continue growing at a faster rate in the future. It is also a good idea to invest in companies that own products you know a lot about or that you frequently use. For example, if someone enjoys watching Marvel Studios movies, investing in Disney will help keep them interested in a portfolio, because they have a direct connection to the company. Junior Mason Langdon said that if he could invest in any one company, it would be Tesla, because of its CEO Elon Musk: “I just think Tesla will keep getting bigger and pushing boundaries as long as he is in charge.” Open up a stock account to start saving today!