As modern youth continue to prioritize commercialism at heightened rates, young people have become hungry for extreme wealth, with many recognizing investing as a key step on the path to millions. Time and time again, experts have echoed a similar sentiment, stressing the advantage of investing at a young age. However, most teens still don’t invest – so why is there such a disconnect between intention and execution?
According to Fidelity Investments’ 2023 “Teens and Money Survey,” 75 percent of teens ages 13-17 who don’t actively invest plan to do so in the future, but only 23 percent have actually started investing. Some suggest this phenomenon stems from a lack of confidence, knowledge, and consistency, but the solution is simple: financial education.
To begin investing, it’s important to understand the mechanics of it. When somebody invests in a stock, they’re purchasing a tiny fraction of a corporation, known as a share or equity. So if they purchased 100 dollars worth of a car company’s stock, they’d own a directly proportional, fractional share of the overall company. As its performance fluctuates, their shares shift accordingly.
Let’s say a company has a particularly poor quarter and doesn’t sell as many vehicles – its stock value would decline, and with it, the amount of their invested money. However, just because an investment’s value is depleted doesn’t mean an investor’s bank account has drained. All the investor did was put 100 dollars into the stock market, and now it’s fluctuating; they’ve still only spent 100 dollars.
Once a prospective investor understands these fundamentals, then they can dive in. The three essential types of investment options for new investors to know are stocks, bonds, and mutual funds.
Stocks allow investors to purchase an ownership stake in a publicly traded company. They range between moderately to extremely risky, and when somebody buys them, they run the risk of losing their money if the company goes down in value.
Bonds generally lend money to a business or government entity. When an investor leaves their money in a bond, they receive interest and eventually make the funds back once their contract ends. Bonds are far less risky than stocks but also return less on average. If the entity folds or goes bankrupt, investors could lose money, but in general, bonds are a relatively safe bet.
The most obvious example of a mutual fund is the S&P 500. Mutual funds are likely the most consistent, rewarding investment options out there, as they’re a curated amalgamation of top company stocks, making them highly diversified. They’re either actively or passively managed by a fund manager who keeps them up-to-date. Mutual funds can be made up of bonds and stocks, as well as derivatives, commodities, and currencies.
“Some of my largest gains have come from investing in mutual funds. Funds are an easier way to invest money because they offer a low-risk way of putting money into interesting sectors and industries without having to worry about managing and trading nearly as often, which for some is all that they want,” said Archie Williams senior and two-year investor Landon Sanchez.
Investing, both as a financial practice and as a banking career, may feel exclusive to hyper analytical, mathematical types. However, across the world of investing, diverse skills are becoming increasingly valued, and a person’s grade in their math class shouldn’t determine whether or not they invest.
Head of iShares Product Engineering at BlackRock Rachel Aguirre stresses the importance of social skills and dedication alongside mathematical aptitude in professional investing.
“We as an industry have gotten more intentional about hiring [from] a broad range of backgrounds and experiences, because having different ways of thought really helps to shape a better answer…Many of the skills that we’re looking for tend to be: are you someone who can think critically? Are you someone who’s creative? Creativity, logic, critical thinking, all of that is important, [as well as] strength and communication,” Aguirre said.
Landon began investing after his dad introduced him to the process. He stayed hooked after understanding the complexities of investments and their various forms.
“I started investing at the very beginning of 2023. My dad started my younger sisters and me with some money, and we would pick an interesting stock, research it, and present it to him on why we should purchase it. By learning how to research the stocks, I fell in love with figuring out the intricate details of different equities and funds and investing,” Landon said.
Investing requires time and dedication; Archie Williams math teacher and seasoned investor David Wronski recommends that young investors immerse themselves in learning and gathering information. He strongly believes one shouldn’t invest in something they’re uninformed about.
“[As you invest,] just continue to learn, because you will never stop learning. Understand what you’re investing in and understand why you are invested in that. If you don’t understand what you’re invested in, then you shouldn’t [be invested in it],” Wronski said.
By utilizing his dad’s mentorship, Landon got a taste of investing while learning about the process and attempting to avoid typical beginner’s mistakes. His strategy was an effective way to enter the stock market while maneuvering around the obstacles that most novice investors typically encounter. If young people can find a reliable mentor with years of experience in the market, like a teacher or family member, it’ll put them far ahead of their peers.
“[My dad] works in the finance field and I am very lucky to have him guide me through the many complexities,” Landon said. “A difficulty I had early on was trying to navigate the overwhelming amount of types of investments there are to do through the stock market, [but he helped with that].”
Students might struggle with finding a starting point that feels right for their situation, but Aguirre has worked to eliminate this trepidation. Aguirre understands the daunting nature of first-time investments and acknowledges financial education’s role in getting started.
“One of the things that I’ve been really passionate about along my career journey is the need for financial education. More broadly, many people look at the markets, they look at investing, and they’re very intimidated by it. And so oftentimes people just never get started. They think it’s too complicated,” Aguirre said.
Economics and history teacher Mike Kelemen shares Aguirre’s dedication to financial education among youth and has three universal steps for new investors.
“One, save. Get in the habit of saving money. Then, get some kind of an investment platform. [Finally,] just do a little research and think about how [soon] you want [a return],” Kelemen said.
To effectively save money, teens must understand their rudimentary inflows and outflows. They should ask themselves: ‘How much money am I making each month?’ ‘How much money am I spending?’ ‘Why?’ Once they’re familiar with their cash flow, they can tweak it. When they see where they’re inefficiently managing their money, teens can determine how to reroute those funds towards something more productive, like a savings account or an investment.
“There are a bunch of different vehicles you can invest money in; you can use [Charles] Schwab or Vanguard, or there are online ones, like Robin Hood, and all these different platforms, you can invest [with them],” Kelemen said.
For minors, starting an account with one of these platforms requires parental assistance and permission. However, high schoolers older than 18 are legally permitted to make one on their own.
To effectively research stocks, Aguirre suggests prospective investors visit BlackRock’s ishares.com to learn more about current market trends and research the best investment options for them. As for when to invest, Aguirre advises that new investors shouldn’t worry about the market’s volatility because trying to predict it is near impossible, and teens should be investing for longer-term advancements.
“[Many future goals] require money in order to achieve and so what investing is really set up to do is to help people not only plan for those goals but see them come to life by making your money work for you, right? So getting the power of time on your side, and that’s really what investing is about,” Aguirre said.
Once one has determined their intended investments and put in their money, Aguirre recommends not to remove those funds. The most effective way to invest is for the long run, so new investors, especially young ones, can’t let their feelings get the best of them.
“Oftentimes [teens] are emotional in their investing, and that’s really not good, and can create core decision making as it pertains to investing. Most notably, you hear a lot about markets are driven by fear and they’re driven by greed, and so those two emotions, in particular, can cause people to make decisions that otherwise they wouldn’t,” Aguirre said.
Another of Kelemen’s biggest tips for students is to build consistent investing habits. He believes that the sooner students start investing regularly, the better, even if they have little money. As soon as they take the first step, they’ll build a strong foundation and eventually be supported and competent enough to make bigger investments when they can afford them.
“[While investing,] you could be putting in 10 dollars a month, or you could be putting in 1,000 dollars a month. You could put in 50 bucks next month, you could put in 300 [the following month]. You don’t have to have a certain amount, it’s [supposed to be] a habit…If you never get a habit of saving anything [early on], it’s going to be hard to get something [in the future],” Kelemen said.
A key part of this process is dedication. New and prospective investors can’t just invest when they remember or feel like it. Receiving birthday money or a new paycheck shouldn’t be the only reminder to invest. No matter the sum, one must be willing to put money into the stock market regularly.
Once they understand and implement these tactics, young people can put money in stocks, bonds, mutual funds, or any other type of investment; the most important thing is that they start somewhere. Combating insecurity, a lack of experience, and being financially uneducated can be challenging, but with appropriate efforts, novice investors can deconstruct these barriers. Investing can be a rewarding practice at any age, but the sooner an investor begins, the more potential they have to make significant gains.
“As someone who’s in high school or in [your] teenage years, you have the value of time on your side. So the sooner you start investing, the better,” Aguirre said.
