Post #38: How to Invest at 16

by Chase Guelette

Who doesn’t want to be rich? I know for a fact that I do. I’ve spent a lot of time learning how to invest at 16. I have found that a dream for many teens, and people of any age, is to someday be the next Elon Musk or Jeff Bezos. Dreams of money, fame, and success aren’t new. People have always desired to be rich enough to buy anything they want! The issue is that most people lack a plan.

Most people’s plan for getting rich goes something like this: 

  1. Go to college
  2. Get a good degree and high paying job
  3. Work for a long time 
  4. Poof! Millions of dollars!

Yeah…..that plan doesn’t work out well for most. Most of the time it goes wrong, and even if you are able to hit all of those points and save lots of money, just working a regular job will never get you the exponential income necessary to become a multimillionaire. 

If you ever really want to make the big bucks, you’ll need to do more than just save your money…which is why you’ll need to invest! And as a young person, you’ll need a comprehensive plan to make sure your investments succeed. Most people never start investing at all.  So this is my personal plan on how to invest at 16.

When it comes to the discussion around investing, there’s a common expression that always seems to pop up: “You need time, or you need money!” which is one of the most accurate sayings you’ll ever find!

The key to the successful investor is simply that: time and money. Investing utilizes one of the most powerful forces on the earth, compound interest. If you’re reading about how to invest at 16, congrats, you have one of the two pieces you’ll need! Time.

Since you’re reading this, you’ll need to do a couple of things before you can start your investing journey. 

  1. Talk with your parents
  2. Open a youth investment account 
  3. Research and devise an investment plan 
  4. Actually commit to putting money into the account!

Step One: Talk to Your Parents

This is by far one of the most important parts! As a minor, most of your life is still being run by your parents or guardians. Unfortunately, you aren’t a legal adult until 18. 

Discussing your desires and intentions with your parents is key. Parents’ reactions will differ depending on their own investing history, but most fit into two categories: Parents who invest and those who don’t. 

If your parents already invest, chances are great that they will support your desire to invest! You can go to them for advice, and when you want to open an investment account, give them a general idea of your investment plan. Parents want to see that their child is confident in themselves.  If you are confident, so are they!

If your parents haven’t invested, you will most likely need to do a bit more work. I’d suggest putting together a comprehensive investment plan to present to them (I’ll talk more about this in section 3). I also suggest mentioning the topic more than once. The more you talk about the idea of investing, the more your parents will understand its importance to you. 

Another key detail for winning your parents’ support  is to show them you understand the risk of investment, and that you are willing to suffer the consequences if things go wrong. 

How to Invest at 16

Step Two: Open Up a Youth Investment Account

The second major step with learning how to invest at 16 is opening an actual investment account. If your parents already invest, then this piece of the plan will be much easier. Simply talk to your parents to find out what company they invest through! 

Three of the most common brokers include Fidelity, Vanguard, and Charles-Schwab. If your parents already own an account at one of these brokers (or any other) they simply need to open a youth account in your name. 

If your parents don’t already invest, then you are able to choose your own investment broker! There are thousands of resources to decide on the best brokers, but the general characteristics to look for are: little to no fees, no interest on money, and trustworthy companies. Two of my personal favorite picks for first time investors are Acorns and Fidelity. Fidelity is a long established broker who offers zero fees and offers easy access to a youth account.

If your parents don’t already have their own investment accounts, you’ll need to have them create their own account, and then open a youth account in your name. Talk to them about the investment journey you want to start! I once again recommend that you create a comprehensive investment plan (I’ll cover this in the next section), and figure out the exact steps to open an account with whatever broker you choose. 

Making the process easy and painless for your parents is the key to this operation. 

Step Three: Research and Devise an Investment Plan 

 The most important part of how to invest at 16….. The actual investing!! Like I stated earlier, in order to see big profits in investing, you’ll need either time or money. Unless you are a serious outlier, chances are you don’t have the money.  So you are going to be investing for the long term.

I’ll start by saying this, forget the glorified idea of day trading and quick profits. People in the stock market to make a quick buck are going to inevitably get burned and lose their money. So stick to investing for the long term!

One method of putting together your investment plan is to pick individual stocks. This option is going to be more time consuming, and let’s be honest, it’s really difficult to do successfully. 

If, however, you choose to pick individual stocks, follow Warren Buffets rule: Choose what you know. Invest in companies and industries you understand. After that, look at the management team of companies, and then think about what sets them apart from competitors. If you want more info on this topic, there are hundreds of YouTube videos to learn from!

The other option is to invest into an index fund. An index fund is basically a combination of hundreds of different companies. When you buy into an Index Fund, your money is distributed across a bunch of different companies. This significantly reduces the risk of your investment, but it does lower the potential upside.

If you are someone who is always busy, then an index fund is the way to go. It’s a simple, easy, and effective method of investing, and offers amazing returns. If you want to sit back and let your money grow, then this is the method for you!

Once you’ve decided on what to invest in, I would compile it all into one place for your parents to see. Put your chosen companies and stocks into a google doc or slide, and then present your plan to your parents! 

How to Invest at 16

Step Four: Actually Commit!

Once you already have the previous steps, this should be the easiest! You have your investment account, you have your investment plan, and you have your parents backing you. All that’s left now is to transfer the money and buy the stocks you’ve spent so much time researching! 

Recap: How to Invest at 16

If you made it this far, congrats!  If you are learning how to invest at 16, you are so far ahead of the pack. Most people don’t even think about anything beyond gas money until college, let alone investing their dollars!

To review, here’s your basic steps:

  1. Talk with your parents
  2. Open a youth investment account 
  3. Research and devise an investment plan 
  4. Actually commit to putting money into the account!

My final piece of advice is this: don’t be afraid to be persistent in your pursuit of investing. Like I said earlier, it’s time and money that will get you real results. 

Next Steps

Think about the different ways to invest at 16 and what investment plan you are most interested in.  Do more research on that plan and follow the four basic steps in this article to get started.

Now go out there and get your Freak on! 

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