Most financial advisors will recommend that investors start young. The younger you are when you start investing, the more time you will have to generate and compound your returns.
What Young Investors Should Expect
In the first few years when you start investing, cash flow will be minimal. The reason is that your investments are still building up cash value and need time to mature before they can generate cash flow as a return on investment.
Be patient and remember that every dollar you invest is a step in the right direction. Over time, cash flow will increase as your investments mature.
Risks of Investing
Before we dive into details, it’s important to remember that investing is risky. Investors are not guaranteed any returns, and they may even lose money.
Investors who take on the risk of investing should be prepared. They should know their cash needs, and how much risk they are comfortable taking on in order to generate cash flow from investments. While some investors might want to invest heavily for a higher return and accept that there is an increased chance of losing money, others may not have as high tolerance for risk or cash outflows – which can lead them to reinvest only conservatively with cash flow generated less quickly.
Know your risk tolerance before you get into investing.
How Old Do You Need to Be to Invest in Stocks?
So, you are ready to invest? The question is – how old do you need to be to invest in stocks?
The good news is you can start relatively early. If you are already over 18, you can open your own brokerage account. If you are still under 18, you will need to open a custodial account with your brokerage.
Some brokers require a minimum cash deposit in order to open an account. Others allow you to use your parent’s cash as long as they are the ones who complete all transactions on behalf of their minor child.
Now that we’ve covered how old do you need to be, let’s talk about what stocks can buy.
What Are Stocks?
Stocks are a type of security or “investment” which represents part ownership in a company and pays dividends proportional to the number of shares owned by investors from profits made by the company over time (in addition, if the investor is lucky enough, he/she may also get cash back when there is an acquisition).
When you buy stocks, you are investing in a company. Essentially, you are betting on the company’s future. When picking stocks, you should choose companies you believe in.
##How to Pick Stocks
So, how do you go about picking your first stocks?
The first thing you need to do is decide on your cash needs. This will help determine the amount of risk you take and how much cash flow generated by investing activities you can expect. It should also be noted that cash flow doesn’t necessarily mean money coming in – it means the difference between cash from investments going out into things like retirement accounts or paying down debt, vs cash from investment returns flowing back into stocks with an increased market value as time goes on.
Pick a few companies that interest you based off what they specialize in (areas such as technology, retail, restaurants). Research these companies for their recent performance and financial growth prospects before buying any stock shares. Remember to only invest what’s comfortable!
Once you’ve picked the stock you want to buy, it’s time to call your broker and let them know what shares of that company you would like.
