As you begin to make money as a teen, you will hopefully start to save some. As you begin to save some money, then youll hopefully start to look into the possibility of investing your money in hopes to make a larger return. Let me start off by saying that investments can be very risky. Even the mo
st seasoned wall-street investors can lose millions of dollars at the drop of the hat, which is why it is so important you only invest with funds you can afford to lose and to make sure that you are a smart investor. The number #1 piece of advice that almost all financial services tell you is to make sure that you pay off your debt, such as student loans, before you begin investing. Sure, it may sound cool to have the possibility to turn your $5,000 into $7,000 after a year, but that initial $5,000 can also turn into $0. Then you will be stuck with $0 as well as debt that will continue to grow due to interest. Now that you have that in mind, here are some great ways that you can begin to invest, granted you have all of your debt paid off, with a small amount of money while being a teen, college student, or young adult.
1.) Make a Fantasy AccountThe best way to learn about the world of investing is to make a fantasy account. Imagine having $100,000 and allocate that money to various investments. Track your progress over the course of a year and along the way you are sure to learn about the world of business or finance. A great way to do this is to perform this with a couple of close friends or your parents. That way you will have someone to talk about these investments with and learn from. Also, many brokerage accounts offer services where you can trade pretend money for free, which will help you gain knowledge on various investments and what not to do when it comes time to investing real money.
2.) Put Your Money Into a Savings AccountProbably the best advice I can give you when looking to invest your money as a teen is to put it into a savings account. When investing with small amounts of money the potential returns are very small. For example, say you invest $1,000 into a particular company. Dont expect at the end of that year to have doubled your money and have $2,000. A 100% return on a given year is incredibly rare and only happens to the luckiest of investors. A great strategy to have is to take the money that you are planning on investing with, putting it into a savings account for a year, and then making a fantasy investing account so you can learn which investments work and dont work. At the end of that year, you will have more money to invest with and a better understanding of potential investments.
3.) Invest in the Stock MarketInvesting in the stock market can be fairly risky, however with the right plan you can minimize your potential loses. It is important to use a fantasy account first so that you understand the ups and downs of the market before you put any real money at risk. It is nearly impossible to predict the direction of a stock and many people invest in a company solely based on speculation of how they will perform in the future. In order to open your own brokerage account you need to be 18 years old, however with your parents permission, they can open up a custodial account for you if you arent yet of age. When investing, keep in mind that you should be investing for long-term gain. Over long periods of time, returns in the stock market have averaged about 10% per year. Some great low-no minimum brokerage accounts that you can check out are Etrade, TD Ameritrade and Trade Monster.
4.) Invest in a WebsiteWith $1,000 you can build a pretty amazing website with a lot of great content on it. You can pay others to design your website, perform SEO for it, write articles for it, get a custom logo and many others all with virtually no work on your end. Fact of the matter is that the only money I put into this website is for the URL and hosting which is only about $10/year and I make easily $1,000 a year with it. With a $1,000 you could build a website on a niche that you are knowledgable on and possibly make some huge returns. Or you could buy 40-50 micro niche sites and make a profit $10-$20 a month on EACH one. I have been investing for roughly 5 years now, in both the stock market and with mutual funds, and I have found that internet marketing blows them all out of the water. It is a lot less risky and a lot easier to predict how much money you expect to make in a given month.
5.) Invest in a Mutual FundInvesting in individual stocks can be risky because you can lose a ton of money if the company you are investing with comes out with a bad earnings report, or worse, goes bankrupt. Mutual funds are investment pools run by individuals. Even if you only have a couple thousand dollars to invest, a mutual funds spreads your money out over several different stocks representing different companies. Check out Yahoo Finance or Morningstar to research various mutual funds that you can invest in. Some high earning mutual funds can make you upwards of a 20% return each year.
For some great sites that offer some more
free advice on investing for teens check out the list below. Make sure you are smart when you start investing and dont rush into it. When I was 18 I invested $1,000 I had made waiting tables into a tech company without doing any research. The company tanked and I eventually lost $500. So be smart and let me know if you have any questions below!
- The Mint: Investing Tips for Teens
- Investment Education for Teens
- Teens and Stock Trading
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