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How Old Do You Have to Be to Buy Stocks?

There are many potentially profitable ways for young people to invest their money, each with their own pros and cons. One of the most popular investment options is stock trading, which can be an ideal way to get into investing as it is an established market with opportunities for both long- and short-term gains. However, the stock market can be risky and so there are age restrictions on how young you can be before you’re allowed to trade stocks.

So how old do you have to be to buy stocks? In the UK and most other countries, the legal age to start trading stocks is eighteen in order to protect underage traders from big losses.

In this article, we will explore the age limits around stock trading, how age restrictions are enforced, and what other options there are for young people who want to start investing.

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What is the Legal Age for Stock Trading in the UK?

Let’s start with the question in the title: how old do you have to be to buy stocks? In most countries, including the UK and USA, it is illegal for anyone to buy stocks under the age of eighteen. The reason why there are laws in place about trading before you’re eighteen is because of the potential risks of the stock market which means that a certain level of maturity (at least in the eyes of the law) is necessary. In the same way that there are minimum age limits for driving, voting, drinking, and smoking, only legal adults are perceived by UK and US law to be eligible to trade stocks. This is done both to protect children from financial risks, and also because children are in most cases not deemed to be legally responsible for their actions to the same extent as adults. 

When it comes to actually enforcing these age limits, there are a few ways that governments, stock brokers, and trading platforms can do this. Usually, they conduct background checks on anyone trying to open an account or purchase stock, and ask for government issued identification to check their age such as their passport or a valid driving license.

What are Custodial Accounts?

All of this means that if someone under the age of eighteen wishes to buy or sell stocks then they need an adult (usually their parent or guardian) who will hold power of attorney over them and make all decisions on their behalf until they turn eighteen. When it comes to trading stocks, this is usually facilitated through a custodial account. This type of account allows young people who want to trade stocks to open an account at a stock broker, but instead of having complete power over their investment decisions, they must get the approval of the custodian before any transactions can be made and executed.

This is done so that the adult in charge has control over what happens to this money and how it gets spent to stop underage traders from blowing all their money or getting themselves into massive financial problems before they have even reached adulthood. 

However, there are some countries that don’t enforce any minimum age limit on stock trading. For example, Japan has no restrictions for teenagers and young people who want to trade stocks so nobody has to wait until they are eighteen to start investing.

chart showing stock prices

What are the Best Investment Options for Young People?

There is no definitive answer to this question because, by its very nature, the stock market is fluid. What is a good investment today may be dead in the water tomorrow. The best thing for most people to do is to start with stocks in businesses they understand. This may mean sticking with large market cap companies like Apple, Amazon and Microsoft and others because these are household names that people trust. Or it may mean investing in a business that you have some interest in or personal connection. Many people start out buying a few shares in their favourite sports team or even in the company they work for. 

One thing that is worth noting, is that new traders are more vulnerable to potential scams than older, more experienced traders. While there are too many of these to explain in one article, make sure that you at least avoid penny stocks because many of these have been known to be scams. These shady businesses will often promise huge returns for an initial investment from naive investors, but all that ends up happening is that people end up losing their money when the company runs off with their cash without delivering any dividends back into their accounts. Just make sure you start small, stay vigilant, and you will soon find your feet.

How to Get Started with Stock Trading

The single most important thing when you first start buying and selling stocks, whether you are over eighteen or you are trading through a custodial count, is to educate yourself about the basics of how the stock market works and what options there are. This will help you understand why so many people lose money when trading: it’s because they don’t really know how to invest their funds or which companies’ shares to buy. You need to learn the tried and tested trading methods, become comfortable with the nomenclature, experiment with different ways of analysing movements and trends in the market. 

Then, you will need to find the right broker to make your first stock purchases. You can try a real-life human stockbroker, or you can use a stockbroker app like Robinhood  which offers completely free trades, as well as many other features and benefits for new and experienced traders alike. 

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Alternative Investments Opportunities

As well as stock trading there are many different other types of investments which can make you a lot of money if you know what you’re doing. As with any type of investment, the most important thing is that you are a sponge for knowledge, and this will help you to minimise your risk, and maximise your potential.

Crypto Trading 

Crypto trading is the act of buying, selling and investing in cryptocurrencies. This type of investment can be great for young investors because it’s extremely volatile, meaning that there are lots of opportunities to make fast money. The volatility means that the value of coins can change enormously within a matter of minutes, so if you know what you’re doing, crypto trading could make you a lot more money than other types of investments like traditional stocks.

However, the reason why crypto trading can be potentially so profitable is, of course, because it can be potentially very risky. The highly volatile market means that it is possible to lose your money in minutes if a coin suddenly plummets in value. The value of different currencies often fluctuates so much that it makes it incredibly hard to predict where prices will go next. This unpredictability can lead to missed opportunities as well as huge losses just as quickly as big profits are made so make sure you are careful and know what you’re doing.

Forex Trading

Forex trading is when you buy and sell foreign currencies in order to take advantage of the changes in value. We all have that experience of going to change our money to Euros and getting less than we received the last time we went on holiday, and forex traders make money from predicting how a pair of currencies will relate to each other. 

Forex trading isn’t quite as volatile or risky compared to crypto trading because there are limited opportunities, but it can still make you a lot of money if done right. As with all types of investment and trade, make sure you know what you are doing, start off small, and get to know the market inside out. 

Real Estate

Real estate investment is when you buy property with the view of renting it out or selling it in the future for an increased price. This type of investment is great for young people because there are lots of tax benefits, and property is usually a safe investment. If you buy the right property, it’s possible to make thousands and thousands in profit each year which can help you build a better future, even if you’re only starting off small. However, buying property comes at a risk as well: what happens if your tenants don’t pay? Or what about unexpected maintenance costs like leaks and broken boilers that cost money but aren’t covered by insurance? As always, make sure you have enough knowledge on how real estate works before making any decisions and everything should be fine. 

Bonds

In the UK, there are a number of bonds that you can invest in as a teenager. Treasury bills will provide a decent return on your investment and they have no minimum age limit for purchase or sale. You can also buy gilts, which are bonds that the UK government issues. They pay interest once every six months and mature five years after they’re issued.

man trading stocks

Advice for Young People Who Want to Start Trading

Get the Right Knowledge First

As we have repeatedly said throughout this article, in order to trade stocks or do any kind of investment, you need to have a grasp on the financial system, economy, and the relevant markets. In terms of paying the stock markets, never jump into trading without learning about how to read the market, what signals to look for, and the different trading strategies which have proven to be successful over the years. Read books, articles, financial newspapers, and watch videos tutorials and podcasts online that break down everything you need to know before you risk your money. Having these foundations in place is pivotal for long-term trading success.

Get a Trading Mentor

One way to obtain the knowledge you need to be successful is by learning from a successful and experienced trading mentor. This is someone who knows the ins and outs of how to make money in the stock market who is willing to share their knowledge with you and oversee your fledgling trading career. The right trading mentor could be a family member, teacher, or friend–but they must be someone who you can trust who has a proven track record of success. They can also teach you about mistakes they made in the past so that you can avoid the same errors.

Use the Correct Software and Apps

There are so many fantastic trading solutions for both new and experienced traders now which have everything you need at your fingertips. You can buy stocks, check charts, monitor the markets, implement stop losses, and do everything else necessary to make money through trading. Look for trading solutions that have a demo mode so that you can practice for free and gain some experience before you risk any money.

Start with Small Trades

This is so important. Do not go all-in and risk all of your money on day one. Start off small and start to build up your knowledge and confidence. As you start to become more comfortable, you can then begin to expand and diversify your portfolio and start to maximise your earnings potential.

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To Sum Up

In conclusion, to go back to the original question, “how old do you have to be to buy stocks?”, the answer is at least eighteen, unless you set up a custodial account through your parents. Once you get started, however, there is potentially a lot of money to be made. It is very important that you give yourself the best possible chance of success by learning the basics, choosing the right software and apps, and starting off with small stock purchases. You can also try out some alternatives to stock trading such as forex, crypto, or investing in property. Set realistic targets, build your experience, and, with the right judgement (and some nerves of steel), you could soon be watching the profits come rolling in. 

I’m Jon, owner of Trade Wise at https://tradewise.community/ and https://www.youtube.com/channel/UC7VmOx8DbvX4Rbrac2pPcjw
I review forex and crypto trading products and services to find the best of what’s out there for creating a passive income without becoming a full-time trader.

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