Guidelines for Minor Investors: At what age can one buy stocks?

Want your money to work for you? The key is to start early. Math will tell you why: the longer you invest, the stronger the magic of compound interest, and small amounts can grow into large sums. More importantly, investing experiences at a young age can teach you lessons that will benefit you for a lifetime. But here comes the question — can minors really trade stocks?

First, let's talk about the conclusion: At what age can one invest?

• Completely independent investment: Must be over 18 years old
• With adult supervision: No age limit (theoretically)

If you are not yet an adult and want to open a stock account, an IRA, or other investment accounts on your own? Sorry, you have to wait until you are 18. But that doesn't mean you don't have opportunities—there are several types of accounts that allow minors to invest with the help of a guardian.

Three Types of Investment Accounts for Minors

1️⃣ Joint Brokerage Account

Who owns the investment? Minors + Adults Who makes the investment decisions? Both parties have a say. Minimum age? No strict requirements

The most flexible option. Parents, guardians, and even trusted adult friends can open an account. The investments within the account are jointly owned by both parties, and the decision-making power is also shared. This means that when you are young, your parents have full control, and as you grow older, you can gradually take on more and more decision-making authority.

Disadvantages: No tax benefits, but the investment options are the most diverse.

Recommended Platform: Fidelity Youth™ Account

• Available for teenagers aged 13-17
• Zero fees, zero minimum balance requirements
• Minimum investment of $1
• Free debit card, 55,000+ ATMs for free cash withdrawal

2️⃣ Custodial Account

Who owns the investment? Minors Who makes the investment decision? Adults (guardians) Minimum Age? No hard requirements

An adult represents minors in opening and managing investments, but ownership belongs to the minors. When they reach the legal age of adulthood (usually 18-21 years), the minors gain full control.

Divided into two categories:

• UGMA Account: Can only hold financial assets such as stocks, bonds, and funds (supported by all 50 states in the USA)
• UTMA Account: Can hold any assets such as real estate, cars, etc. (Supported in 48 states, excluding South Carolina and Vermont)

Tax Advantages: By utilizing the “child tax” rules, a certain amount of income can be taxed at the child tax rate each year, significantly reducing the tax burden.

Recommended Platform: Acorns Early

• Requires Acorns Premium membership ($9/month)
• Automatic rounding investment (buying a $2.60 coffee, automatically rounding up to $3, putting $0.4 into the account)
• Users invest an average of $30 per month

3️⃣ Custodial Roth IRA

Who owns the investment? Minors Who makes the investment decisions? Adult Prerequisite: Must have work income (part-time, allowance, etc.)

If you worked a summer job, did babysitting, or tutoring, you have “earned income”. In 2023, you can contribute your earned income or $6,500 (whichever is smaller) to a Roth IRA.

Why is Roth suitable for teenagers? Your current tax rate is very low (possibly 0%), locking in the low rate with Roth means that all growth is permanently tax-free. The growth from decades of compound interest — all yours!

Recommended Platform: E*Trade IRA for Minors

• Zero commission trading (stocks, ETFs, options, funds)
• Optional automated investment portfolio or robo-advisor (Core Portfolio)
• Rich educational resources (articles, videos, webinars)

3 Types of Investments Suitable for Minors

stocks

Buying stocks = buying a small part of a company's ownership. If the company performs well, the stock price rises; if it performs poorly, the stock price falls. The benefit is that you can learn real business knowledge while investing and understanding the market.

Mutual Funds

A type of “lazy investment” - just put your money in, and the fund manager will help you buy dozens to thousands of stocks. Risk is diversified, and safety is higher. The cost is an annual fee.

ETF (Exchange Traded Fund)

Like a fund but cheaper. Most ETFs passively track an index (for example, tracking the S&P 500), automatically buying all the stocks in the index. Low fees and usually outperform actively managed funds. Most friendly to teenagers — you can invest in hundreds of companies with $1,000.

Why is it better to invest early?

The power of compound interest

Assuming you invest $1,000 in an account with a 4% return:

• End of Year 1: $1,040 (earned $40)
• End of Year 2: $1,081.60 (earned $41.60 — note that the interest itself is also earning interest)

This is compound interest. The longer the time, the more explosive the effect.

establish lifelong good habits

Learn to save and invest from a young age, and when you grow up, you can naturally incorporate investments into your daily budget—just as important as rent and utilities.

has time to buffer market fluctuations

The stock market has both rising and falling cycles. If you start investing at the age of 20, even if you experience 5 bear markets, there are still 40 years to recover. This is the greatest advantage of being young.

Bottom line

You cannot invest independently before the age of 18, but there is a way. Find a trusted adult (parents are best), choose the right account type, start now. With small amounts of money under the compound interest magic, it will become an important asset in your life decades later.

Key Numbers: The earlier you start, the more exponential the growth. Don't wait.