How Old Do You Have To Be To Invest In Stocks?

When it comes to investing, it’s always better to start sooner, rather than later. But how old do you have to be to invest in stocks?

In this article, we’ll delve into the legal age requirements for investing in the stock market. We’ll also discuss a way for young investors to get started with stocks before they reach the minimum age.

How Old Do You Have to Be to Invest in Stocks?

The legal age to open a brokerage account and buy stocks is 18. This is in line with the legal definition of an “adult.”

People are deemed capable of signing legally binding contracts at the age of 18 — including the ones needed to create a brokerage account, which is a requirement for investing in the stock market.

However, many brokers offer custodial accounts, which allow investors younger than 18 to buy and sell securities with help from their parents or legal guardians.

Custodial Accounts: A Pathway for Younger Investors

Custodial accounts allow people who are not of legal age to make stock market investments. Until the minor reaches adulthood, these accounts are managed by a parent or guardian.

Minors can own stocks, bonds, mutual funds, and other securities through custodial accounts. The minor’s investments are made on their behalf by the custodian, who is usually a parent or guardian.

However, it’s crucial to remember that the minor will need to take management of the account once they reach 18 years old.

Educational Benefits of Early Investing

There are plenty of benefits to getting started as a young stock investor:

  • Understanding the Stock Market: Young investors learn the mechanics of how stocks are bought and sold and the impact of economic events on investments.
  • Learning the Value of Saving and Investing: Young investors learn to differentiate between short-term spending and long-term investment goals, emphasizing the importance of saving for future gains.
  • Grasping Compound Interest: Young investors learn to understand how investments grow over time, encouraging long-term thinking and regular investing habits.
  • Developing Financial Responsibility: Investing cultivates discipline, patience, and informed decision-making skills that extend beyond finance.

Risks and Considerations

Investing in stocks isn’t without risk. It’s important that young investors learn to understand market volatility and unpredictability. It’s also super-critical that they understand that there’s always the potential to lose their invested capital.

Parents and guardians can help young investors take a strategic approach to investing to minimize their potential losses. This includes setting clear financial goals and understanding risk tolerance. It’s also important that young investors learn to mitigate risk by diversifying their investment portfolios and adopting a long-term outlook.

Early investing offers valuable financial education and skills for a lifetime. It’s essential to balance the opportunities for growth with an understanding of potential risks. With proper guidance and strategy, early investing can be a rewarding educational journey.

Start Your Investing Journey Today

So how old do you have to be to invest in stocks? The standard legal age is 18.

However, minors can start early through custodial accounts. These accounts can help them gain valuable financial education and discipline.

It’s vital to recognize investment risks and strategize accordingly. This knowledge is key for young investors and guardians and can guide them toward a successful and informed investment journey.

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