Investing as a teen

“Investing is only for adults. You can’t do it as a minor!”

This is a phrase I am sure teenagers have heard who tried to start to invest. Well, it is technically true. If any of you, like me, tried to set up an account, you couldn't, because you were underage. It’s a shame, really, but that doesn’t mean you can’t bend the rules a little! As I am writing this, my money inside several index funds is aging like fine wine. You might be thinking, how did I do this? Actually, it’s pretty simple!

1) Get a parent/guardian. Talk to them and explain what you want to do. They’ll be the main driver of your machine. I’m sure they’ll agree; if they don’t, try again! The earlier you start, the greater potential your money has to grow.

2) Ask your parent/guardian to open a Custodial Account. If you are unfamiliar with one, a custodial account is an investment account set up by an adult for the benefit of a minor. That means nobody, not even your parents, can withdraw your money for themselves! Pretty cool, right? They have different names in different countries. UGMA/UTMA for the US, Junior Depot for Germany, Junior ISA for the UK. In some countries you will need to open a Joint Account.

3) Find a platform. Now comes the most confusing part and where your parents come in. There are tons of investing apps; don’t download the first one that pops up! The best one for me might not be the best one for you; it all comes down to your region.

Look at things like:

• Fees - how much does the platform charge you for investing?

• Available investments - what does the platform offer to invest in?

• Taxes - how will your investments be taxed?

• Regulations - is the platform well-regulated?

4) Invest! After you secure an account and the right platform for you, you can start to invest your money. Welcome to the investor club, congrats!

“What if I only have €20?” You don’t need thousands or even a hundred to start learning and investing. Let’s say you have those €20 a month. Investing isn’t a competition of who has the most; it’s all about building a habit. Those €20 are €240 a year, €280 in two! As the years go by, not only do your contributions add up; but also your investment returns. On the other hand, markets can fall, that’s why starting small can be useful: you're learning how investing actually works without putting a huge amount of money at risk.

The only thing left now is to choose the right stock to trust your money with. If you don’t know a single thing about investing just yet, I would start with diversification. In simple terms, don’t put all of your eggs in the same basket; if one egg breaks, so do the others! Same goes with investing, diversify your money. The easiest way to do so is to invest into index funds. The most famous being S&P 500, it’s a stock market index that tracks the progress of the top 500 performing companies in the USA. This way, you get exposure to a lot of companies at once.

5) Wait. No matter how much you invest, your strongest weapon is time. So don't expect your money to quadruple overnight! Remember how I said my money is aging like fine wine? I really meant it! Rates fall and grow, so be patient.

Increase your contribution. Once and then, you should add a bit more money to your stocks.

In the simplest terms possible:

✘ Find a stock -> buy it -> hope for the best.

✓ Find a stock -> invest consistently -> give it time to grow.

Remember:

You don't have to become a master investor at the ripe age of 15.

But you can become financially literate at 15.

And when you're 25, 35 or 45, that knowledge could be worth far more than the €20 you invested now.