Buying Stock Online for Teens

Investing in the stock market can be an excellent way for teenagers to learn the importance of budgeting, investing and financial management. Plus, it gives teens a head start on building their own self-sufficient income and saving for college. However, being a teenager can present a few minor roadblocks. For example, teenagers under the age of 18 will need to have an adult register their investment account for them. Learn how to buy stocks online for teens and become a successful investor.

Instructions

1. Determine whether you need an adult to register a stock investment account for you. In most states, you need to be 18 or older to sign a contract. If you are under the age of 18, ask a parent or another adult to register an investment account for you. This is called a custodial account and lets you control the investment decisions under the name of the adult in which the account is held.

2. Choose an online brokerage firm. The brokerage firm is the company you pay to buy and sell your stocks. Major brokerage firms include Charles Schwab and T. Rowe Price. However, these firms generally charge higher commissions and require you to invest a large amount of money at once. In contrast, online brokerage firms (such as E-Trade and ShareBuilder) let you invest in small monetary increments. Online stock investment companies also typically charge less fees.

3. Decide the type of investment account you would like to use. You can either buy stocks directly and hold actual shares in a company, or you can invest in a mutual fund. A mutual fund is a group of stocks chosen by purpose or growth and risk levels. If one of the stocks in the mutual fund drops in value, it is generally balanced by the other stocks in the fund. Thus, mutual funds are typically less risky.

4. Buy stocks through the online brokerage company. Most online firms make it fairly easy to purchase a stock by browsing a stock listing or manually entering the stock's symbol. The brokerage site will present you with the current price, and you can choose how much money you wish to invest in that particular stock. The company will then deduct the money from the payment option you chose (for example, a credit card or bank account), plus any fees that the company charges. You now own stock!

5. Consult a financial adviser or stock analyst before investing large amounts of money. The stock market can be very tricky and stock prices can fall or rise in value quickly. The potential for profit is large, but so is the risk. Also, check if your stock holdings will be counted as assets. This is especially important for teens about to go to college and applying for need-based financial aid.

Tips & Warnings

• Online brokerage firms offer teens a chance to invest in stocks in small increments and with less fees.

• Consult a financial adviser before investing large amounts of money in stock.