Where Should Teens Invest
May 4, 2017
For many new investors, trying to buy stocks or bonds can be very confusing. There are many different kinds of investments traded on the stock market. Numerous bonds are offered through the government and companies which can make for a confused junior investor.
To buy stocks or bonds you must be at least 18 years of age. When a company is listed on the New York Stock Exchange, Asian-Pacific Stock Exchange, etc. it means that they are a public company. The company values themselves at a certain price and lists the number of shares their company is willing to sell. To get the price of the stock you take the value of the company is worth and divide it by the number of stocks that they are selling. After you finish researching what you would like to buy, you can buy them many ways. You can either go to an investment company, such as Edward Jones or TD Ameritrade, or there are websites such as DRIPInvestor.com that will show you a list of companies that you can buy stocks from directly. To buy a stock or stocks from your broker, you submit an order. Then your broker will buy the stock for you, but your broker will receive a very small portion of money on every stock you buy. They will typically only receive 3 to 5 cents per stock, but it can add up. If you would like to buy stocks or bonds that are on stock markets outside of the United States, you must go through investment companies that are licensed to do international trading. To make money on stocks, you can sell your stock at a higher price than you bought it for, or the company you have stock in gives a portion of their profits to shareholders.
To buy bonds, you must figure out what kind of bond you would like to buy. To simplify the different kinds, there are Corporate and Federal Bonds. Within Corporate and Federal Bonds, there are numerous different kinds of each. Federal Bonds are much safer than Corporate Bonds, but will have lower interest returns. Corporate Bonds will have higher returns, but if the company files for bankruptcy then they no longer owe you the amount the bond was worth, so they have much higher risk. Typically, the Corporate Bond market is much more complex and is only left to expert investors due to their volatility. To buy Corporate bonds, you must buy through a brokerage firm. Prices for Corporate Bonds typically start at $1000 and increase by $1000 and mature between one and twenty years. To buy Federal bonds, you have to make an account on treasurydirect.gov and select the kind of bond that you would like. After you select the kind of investment that you want, you put in the amount of money you are willing to spend and the interest rate will stay the same for the next six months on bond.
When you go and buy stocks and bonds, the ratio between each depends on the amount of risk you are willing to take and how much money you would like to get from your portfolio. With bonds, your money will be safer, you receive a lower return and they are easier to buy. With stocks, your money is less safe, you receive a higher return and they are harder to buy. Since teens most likely don’t have a financial planner and would like to have more security with their money, then bonds would be much easier to set up and maintain for them.