Open a Custodial Account
When you’ve read everything you can about investing and you have some money you want to try out the market with, it’s time for you to open up a brokerage account. The best route to go is through an online brokerage account.
There are two problems with getting a brokerage account. The first problem is that most brokerage firms can be expensive. Not only are the costs of trades often high, but they can sometimes be as much as $15 per trade. Also, there is usually an account minimum. This can be anywhere between $1,000 and $2,500 or more. You may have $1,000 you would like to invest, but you probably don’t.
When I turned 18, I opened up an online account with Sharebuilder. What drew me to Sharebuilder at first were the low commission payments. I only had to pay $4 per investment. This means, that every time I buy shares of stock from one company, I have to pay $4. Whether I invest $10 or $200, it’s still $4. But if I buy stock at the same time from two different companies I have to pay $4 for each company, totaling $8.
Another benefit is that I can invest $10 or $200. Not only is there no minimum investment, but you don’t pay for 1 share. Let’s say one share of Johnson & Johnson costs $54.31 on a certain day. Instead of paying $543.10 for 10 shares, I can decide to buy $100 dollars worth. Therefore I would own 1.84 shares. The benefit of this is that I can invest any amount whenever I feel like it without having to worry if I have enough money for a certain amount of shares.
This brings us to one of the most important advantages to the broke teenager, there is no account minimum. I started my account with $20. The only rule is that each transaction can’t be less than the transaction fee. This means that if you pay $4 for each transaction fee, you have to invest at least $4. That’s not bad, in fact, I wouldn’t recommend such a small amount. The transaction fees can be less depending on what program you’re in. The basic program that has no monthly fees is $4, but it can be less if you pay monthly fees for more privileges.
I would recommend on a small budget to just go standard.Now you may be wondering, if you’re a minor, if you can open an account. You can open a custodial account. You could open up a custodial account with a parent, or guardian. You would own the account and the assets, but the custodian would manage the account until you reach the right age to manage it yourself.
All this really means is that you will own everything and make all the decisions, but your custodian will manage the transactions. So start investing now, if you are ready, or keep reading and studying until you feel comfortable. Finally, when you are ready, I would recommend Sharebuilder because I am a very pleased customer and it works great for the young and less financially equipped.
