How Old Do You Have to be to Buy Stocks?

Buying stocks can set you up for long-term wealth. Your money can compound over time and dividend-paying stocks can provide quarterly cash flow. However, not everyone can trade stocks. You have to be 18 years old to buy stocks on your own. If you are younger, there's still an opportunity to grow your portfolio. You can invest as a minor if your parent or another guardian opens a custodial account with you.

Investing is risk-fraught and it is not for the faint-hearted. However, long-term investors can generate significant gains if they are patient, do their research and continue investing in their portfolios.

What is Investing?

Investing is the act of buying assets like stocks and real estate with the intent of realizing a profit. Simply put, it is plowing in money in anticipation of future returns. Since investment involves two scarce and costlier inputs, namely time and money, it should be done judiciously, wisely and with utmost care.

So, what is the right age when one can start investing? We set out to explore.

How Old Do You Have to Be to Invest in Stocks?

18 is the minimum age set by most brokers for opening an account with them. This is because 18 is when a person can legally enter into a contract on his own. Some states have a mandatory minimum age of 21 for letting someone invest in stocks.

These are the states that have an over-18-years minimum requirement for investing:

• Alabama, Delaware, Nebraska – 19 years
• Mississippi – 21 years

How to Buy Stocks

If you're ready to build out your portfolio, our step-by-step guide will help you begin investing.

Step 1: Check the Age Requirement

Children who are below 18 can have their tryst with Wall Street, but not without handholding. They can work in sync with their parents or their trusted guardians or elders to gain experience in investing.

This is called passive investing, where parents or elders buy stocks in the name of their minor wards.

Legally, even minor children can own stocks, either bequeathed to them through a will or as a gift. However, trading in stocks can be done by setting up a 'Uniform Transfers to Minors Act' or 'Uniform Gifts to Minors Act account,' depending on the state of your domicile. The account owner is an adult, but he is operating the account on behalf of the minor.

Once the child attains the mandatory minimum age, the custodian can be removed from the account and the former now becomes the sole owner of the account.

Children below the eligible minimum age can have something called either the guardian account or custodial account, which allows holding stocks in the name of the minor, but the account is operated by the minor's designated guardian, who can either be his/her parent or a legal guardian.

Step 2: Select an Online Broker

A young investor would do well if he scouts around for a no-frills online broker which will not charge outrageous commissions. Those brokers having no minimum investment, no minimum account balance and no activity fees could be a better bet, as fledglings aren't expected to have a huge investable surplus.

Step 3: Research Potential Companies

Next it's time to look into the companies you want to invest in. Begin with a company's annual report. Take a look at the annual letter to shareholders. This will give you an idea of what is happening within the company and help you understand the numbers in the annual report.

Follow up with some research through your broker's site. Use the analytical tools to evaluate each potential company. You can also look into SEC filings, quarterly earnings updates and the recent news. Take a look at your broker's education options to see if anything is offered to help you learn to pick stock. You'll likely find a free webinar or on-demand video available.

Step 4: Buy Stock

Start small when you purchase stock for the 1st time. You can purchase just a single share and add more over time.

You may also want to look into fractional shares. This allows you to buy a portion of stock, which can be a good option if you're looking at more expensive, well-known stock.

Build Your Stock Portfolio

You can invest in stock as soon as you have some extra cash to spare. Even if you are younger than 18, you can invest in stocks if your parent or guardian opens a custodial account for you. Saving money and earning more income will help you capitalize on market opportunities when they appear. You don't need to wait until your 30s or 40s to buy stock. You can get started right now and our top online brokers can help you along your journey in the stock market.

Frequently Asked Questions