Where To Invest As A Teenager | Investing For Teenagers | Lab Of Rich

Where To Invest As A Teenager

In this blog you will learn Where To Invest As A Teenager.

Today's blog is more focused on our younger generation who have an incredible amount of time advantage in investing over the rest of us.

Did you know that just because of this time advantage our younger generation can have a huge amount of wealth when they turn 30, 40 or 50 compared to the current older generations?

We still don't understand why schools don't teach our children to handle money well. And we also think that they will not be teaching it shortly.

Okay enough to criticize our education system. Let's get into the blog. When you start investing regularly from a young age you give your investments more time to grow with the help of compound interest which is one of the best advantages teenagers can get for their investments.

This is the reason why most personal finance coaches recommend investing at an early age allowing your investments more time to grow till your retirement.

So where should you invest your money to generate maximum returns?

 

Invest In Yourself

The first thing you need to do is to Invest in yourself. This can pay off really better than the returns you would get on stocks or any other investments.

Usually, your dreams and aspirations change as you age. You may want to become a singer at 15,  but when you reach 25 years of age you may want to become a businessman.

But that should not stop you from acquiring new skills at a young age, any skills you learn will surely help you in your future.

Any skills you acquire don't have to be expensive. In today's internet age you can get

educated for almost free so go and start learning.

Stock Market

The second thing you can invest in is the stock market. We know that as a teenager you will not be making a lot of money but you can start your investing journey by buying a small number of stocks and also with fractional shares available in most brokerages.

You can even buy it with a very less amount but if you are below the age of 18 you cannot open your personal brokerage account for buying stocks. To get around this roadblock you can open a custodial account, a specialized brokerage account opened and operated by your guardian or parent on behalf of you.

You will take ownership and management control of the brokerage account as soon as you attain the legal age but choosing a stock is not as easy as you think. It requires a lot of time and effort but if you're confident enough to research and buy good companies with a long-term Perspective then go ahead and try it.

One of the problems that we see among teenagers is that they want to get rich quickly. They want everything now so they often get into intraday and swing trading to make a quick buck but trust me if you enter trading with this mindset it will make sure that you remain poor.

Anything with a short-term perspective will remain short-term. I am not saying that you cannot make money in trading but the statistic shows that over the long run most of them don't. So your chance of winning by investing for the long term is higher than trading for the short term.

If you are someone who doesn't want to read financial reports and that boring stuff we have a better option for you.

Low-Cost Index Funds or ETFs. 

While investing in individual stocks has the potential to earn you higher returns it is equally risky as well if the stocks you have invested in lose value, you will end up losing all your money. So if you want to play it safe while enjoying a reasonable return on your investment you can invest in low-cost index funds or ETFs.

Low-cost index funds diversify your investments across many companies that constitute a specific index. For example - An index fund that aims to track the returns of the Nifty 50 index will invest your money in stocks of the nifty 50 companies reducing your investment risk by spreading your investment across 50 different companies.

The Nifty 50 index has historically generated an average annualized return of 15% which makes it an ideal long-term investment option for young investors and teenagers.

Alternatively, you can invest in exchange-traded funds that work almost the same way as the index funds. Many types of ETFs such as equity bond commodity and currency ETFs are available giving you exposure to different asset classes depending on the type of ETF you select.

This is also a long-term game and the money you invest in your teenage years will grow into a large nest egg in your 30s, 40s and 50s.

Real Estate

Real Estate investment trusts or REITs. Reit is a company that owns finances and manages income-generating real estate properties. Most of the REITs are publicly traded on stock exchanges and trade like stocks to get exosure to the real estate and get diversification

You as a teenager can consider investing in real estate investment trusts with your custodial brokerage account unlike real estate investment REITs which are highly liquid because they are available for trading on the stock exchanges. As a read investor, you can also enjoy the dividend income paid out by them.

Stay Away From Student Loan

Stay away from piling student loan debts. If you can keep your student loans at a manageable level, you can secure your financial future and can stay away from falling into a debt trap.

Reducing your student loan by each rupee is similar to investing that rupee. Many teenagers do not understand the importance of staying away from student loans and end up overburdening themselves with an overwhelming amount of debt paying high interest on the outstanding balance.

So if you can,  we highly recommend you stay away from it.

Start A Small Business

The last one would be to start a small business. Teenagers can start a small business like selling t-shirts or printed merchandise by setting up a small shop.

The idea is to learn the basics of doing business and to help them learn about the process and various steps from buying supplies to value addition to marketing and selling products for profit. You can choose to reinvest the profit in the growth business or you can withdraw the profit to finance your studies.

You should start small so that even if you lose your investment it doesn't break your bank. If you're short of funds you can partner up with your friend and share your funds more than the profit. 

The experience of doing business will give you a great return in your life. Once you're able to generate a reasonable profit on your time and investment you can always try to expand it to generate a higher and sustainable profit turning it into a bigger business.

The majority of the big corporations that we see today started modestly and gradually grew and achieved success.

Conclusion

Investing early always bears fruit in the shape of a higher compounding effect and a larger sum of money at the time of retirement even on a modest rate of return.

When the habit of saving and investing is calculated in teenagers at a young age, they will get financial literacy and will be able to make smart decisions leading to financial independence.

The fact that you are reading this blog as a teenager gives you a head start in your personal finance journey than most of them and by following the ways we mentioned in this blog you as a young investor can gain financial independence earlier than the rest of us.