Being a minor and talking about investing don’t exactly go hand-in-hand.
Right till we join college and learn the modules of finance, we aren’t sure enough about what investments mean and how we can benefit from them in the long run.
But if you are under 18 years old then investing is a great idea.
It gives you an advantage in the later years of your life. Rather than being in your 30s, 40s, and starting then, it’s great to start as a teenager as it brings financial discipline into your life sooner than ever.
Holding your position in the market and investing as a minor has its perks.
It gives you ample time to not get affected by the volatility of the market. You will have more time to accumulate wealth, stay invested in the long run, or even save for the major expenditures in your life ahead like your college fee, buying a house, getting married, and whatnot.
How to invest as a teenager
So let’s start with how to invest as a teenager? For this, you will have to ask your parents/guardian to manage an account for you until you turn 18.
Asking your parents about investing as a teenager is a smart move, both financially and logically.
In this account, you can put your pocket money, or even ask your parents to keep adding to it from time to time to accumulate wealth over time.
You might be thinking why can’t you directly go and open an account as the adults do? It’s because it is not considered for a minor (a person who has not attained 18 years) to make financially correct decisions. That’s why it’s crucial to have a guardian manage your account who’ll be responsible for all your investments.
What is needed to open an investment account for minors?
- A guardian (in most cases your parents)
- Your birth certificate for the proof of your age
- A document to prove the relationship between you and your guardian
- The bank details of the minor under whose name the account will be created
Now you are ready to start investing as a minor, you need to make sure that your guardian is handling all the accounts. And once you are 18, the investment account will be transferred to you. At that point in time, this account will be completely owned by you and you can withdraw the amount at your convenience.
Where to invest as a minor?
Now, in terms of what to invest in, you don’t necessarily have to start by taking risks and investing in stocks that you don’t know much about.
You can easily go ahead and start investing in mutual funds since they are more secure and will help you save money at your convenience.
You can ask your guardian to help you sign up at MoneyIsle to invest for you as an under 18 years old. These applications are being used by a lot of people for investing as their interface is quite easy to navigate through and also quite self-explanatory.
Investing as a minor can be tricky if you don’t know your options. To help you make smart decisions about investing, you can take into account the following factors:
Invest in Individual Stocks
Can minors invest in stocks in India? Yes, If you are under 18, you can still invest in stocks in India. The only condition is that a guardian is handling your accounts.
One of the best ways to generate growth from your savings can be by investing in equities or simpler words, individual stocks. Individual stocks will come with a high degree of risk as you are investing your money in single-company stocks. You will therefore be impacted by the company’s success and also its failure. If a company is not able to generate profits, the existing shareholders might sell the stock which in turn will lower the value of your stock.
You can invest in growth stocks or value stocks. Growth stocks are stocks of companies that are expected to generate returns from the growth of the company. So you need to think about how the company plans to improve its profits and revenue over time.
Invest in Mutual Funds
Investing in Mutual funds will save you from the high-risk factor that the individual stocks hold. And because you are investing as a teenager you don’t need to invest all the money in individual stocks. Investing in mutual funds will diversify your portfolio. It will save you from the volatility of the individual stocks as they go down as quickly as they go up.
Mutual funds provide you with the performance of various stocks. Some mutual funds might also invest in bonds or other assets. This way you don’t rely on the success or failure of just one company. You diversify your investments. So even if one company goes bankrupt, you wouldn’t lose all your investment as you would have hundreds of other companies in that mutual fund. The other companies might have grown so well that the company that made a loss might not even be impactable.
How to invest as a minor?
As a young investor, you can always ask your guardian to help you get started with your investments.
To start investing, you need an investing account. You can start by:
- Allocating a parent or a guardian for your account. This helps you and them stay accountable and allows them to oversee any account obligations required.
- The next thing required for opening an account is the birth certificate of the minor.
- A document that states the relationship between the guardian and the child is also required.
- The documents of the guardian, which include their Aadhar PAN card are also required.
- The payments made to the account of the minor could be made from the account that’s created under his name under the supervision of his guardian.
From this blog, you can take away how you can start investing at an early age in your teenage years. What are the advantages of investing as a minor and what are the options for investing for you?
To brief, investing as a teenager will give you the advantages above everyone else as you will have the very important factor that plays a vital role in investing, that is time. This will massively impact your financial life ahead. Investing in the early years will make you financially smarter and you’ll be able to learn what works for you and what doesn’t, without having to think about the risks.