Proper Techniques on Investment For Teens
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How many of you feel confident in your financial management skills? Are you ready to properly track and budget your money for everything in life? You might be surprised just how many teenagers feel unprepared. A survey of 1000 teenagers revealed that 54% feared for their financial future. Many of these respondents did not feel secure because they did not know useful methods for investment for teens. More than a third of the entire group said that they didn’t have any in-depth financial education for teens. Because they didn’t know much about finance, like the meaning of inflation or tax returns, these teens did not trust themselves in making the right decisions.
The last thing we want is for us to make bad choices with our money. Many of us have made poor investments or funded unprofitable projects. So, if you’re a teenager, a fresh graduate, or someone starting to dive into the investment world, here are some key tactical tips for investment for teens.
With these tips focused on investment for teens, you can learn more about managing your budget and protecting your investments in the long run.
Avoid: Individual Stocks
Rookies in the stock market are usually tempted to put all their money into a single investment option. In their minds, it’s easier to handle your cash when you only have one thing to focus on. Dedicating your money to what feels like a surefire success may seem less stressful.
However, don’t put all your eggs in one basket. Investing everything into one stock is a big risk. For example, the GameStop stock initially peaked at $500 before plummeting to the 100s. Those who did not sell their stocks or who tried to wait for a higher pay-off ended up losing more profits than they ever bought. The important thing to remember when handling investment for teens is that the stock market is fickle. Any individual stock can quickly become valuable or detrimental.
Consider: Index Funds
Diversifying your stocks and investment options for teens is always a good start. By setting aside cash in multiple different options, you can safely check which ones are doing well and which ones need work. Think of it like managing a football team: instead of planning your game on a quarterback, you focus on building up and improving the whole group. That way, if someone gets injured or needs to go away, you still have other people who can pick up the slack.
Avoid: High-Risk, High Reward Plans
“The younger you are, the more time you have to fix your mistakes.”
That’s the mindset that many younger investors have when they examine their stocks. They feel that they have all the time in the world to earn back for any poor business plans they sink money into. This is especially true for those who like to try and earn a lot of money in a single stock or trade. They try to win big and are willing to spend whatever amount they can because they care more about the payoff than the losses.
While risks are unavoidable when planning out all investments for teens, gambling on a high-value payday is not good. You leave too much chance on numbers that are likely to change. Even if your current stocks grow into three-digit values overnight, that’s a rarity in the overall calendar of the stock marketing world.
Consider: Long-Term Profits
Focusing on your long-term profits is always a wise strategy, especially when it comes to investment for teens. It’s never too early to start planning for the future. Consider different long-term investment plans like compound interest deals and mutual funds. These plans can take decades to earn money, but they are more stable in giving monthly or annual returns. Remember that as teenagers, you have plenty of time to increase your portfolio. By having some tried-and-true options in the backseat, you can still explore different investment options for teens without risking money in one big gamble.
Avoid: The Waiting Game
Some investors like to hold on to their stocks as tightly as they can. They only make trades once in a blue moon, refusing to let go of what they have even when better deals are offered. The reason why is that these kinds of investors keep hoping for a more expensive payoff. They might think that the value of their stocks will rise in the next few years. Even when their stock options start to cost them money, these investors believe that things will turn around.
If you wait too long in the investment world, you might have already lost your chance. It’s unlikely that a stock that falls by 25% will suddenly bounce back to over 30%, even if you wait an entire decade. It’s more likely that the trend will continue downward, falling as low as 50% or 60% from its original price.
Consider: Timely Trades
Consider the best time to trade or sell your investments. When a value is good, you could wait a little longer. However, it’s always a good idea to strike when the iron is hot. Remember the cost of the GameStop stocks? Those who decided to sell at $300 made the right call. Even if the stock price rose by another hundred, they still earned a good amount of cash for their trades.
Consider the best time to trade or sell your investments. When a value is good, you could wait a little longer. However, it’s always a good idea to strike when the iron is hot. Remember the cost of the GameStop stocks? Those who decided to sell at $300 made the right call. Even if the stock price rose by another hundred, they still earned a good amount of cash for their trades.
Avoid: Fads and Trends
Have you ever read how popular the latest stock options or the newest cryptocurrency is? The value of Bitcoin, GameStop, and other stocks have often made headlines, especially when someone gets luck and earns six-figure deals for their trades. However, following the trend could be disastrous when planning out any investment for teens. Like the changes in fashion, popular investment options are only a short-term trend. While you can invest some money into these stocks, your hopes of a large payoff might never be realized. By the time you begin trading for these stocks, their value might have fallen by several dollars.
Avoid: Complacency
At some point, you might grow comfortable with how your investments have been built. You might be feeling confident that with the choices you made, you won’t need to worry anymore about how they perform. Many teens feel that once they get a good profit, then there’s no need to check or review their stuff. The problem is that being complacent will leave you vulnerable when things change. Sometimes, the value of your stocks can start to fall down and you’ll be forced to abandon or trade them. Remember, when it comes to investment for teens, there’s no guarantee that a good thing will last forever.
Consider: Occasional Risks
We said before that choosing gambles or high-risk investments is a bad idea. For the most part, this idea is true if you are looking for long-term returns and results. However, taking a risk on occasion is a good way to earn more money. What makes the gamble dangerous is when you overextend your resources. If you have 100$ in your pocket and spend $90 on a risky stock option, you risk losing so much and there’s no way to guarantee that you’ll get that money back.
Instead, make a “risk fund” to experiment with investments. This fund should only include money that you are okay with losing if you make the wrong call. By having a completely expendable fund, you can start to test the waters on other stocks and not be in danger if it goes bad.
The Bottom Line About Investment for Teens
Planning out your future is not easy when it comes to choosing stocks or investment options. There are many options to choose from and making the wrong call can literally cost you everything. That’s why these five tactics are dangerous if you want to make a good profit or get safe returns for your money’s worth. Follow these five alternative plans and you can help build your stock portfolio for the better. With them, you’ll be better positioned to negotiate and plan investments for teens and for the future.
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- Adams, R. (2022, May 13). Start Investing As A Teenager + What You Should Invest In. Young and the Invested.
- Artzberger, W. (2022, May 16). Avoid These 8 Common Investing Mistakes. Investopedia.
- Dore, K. (2021, September 6). Many teens are reluctant to invest in the stock market after the GameStop frenzy, survey finds. CNBC.
- Li, Y., & Pound, J. (2021, January 28). GameStop’s stock closes down more than 40% after brokers place restrictions on trades. CNBC.
- Pinsent, W. (2021, May 13). 5 Common Mistakes Young Investors Make. Investopedia.
- Reinicke, C. (2022, June 1). 54% of teenagers feel unprepared to finance their futures, survey shows. CNBC.
- Stammers, R. Accessed on June 29, 2022. Tips for Avoiding the Top 20 Common Investment Mistakes. The CFA Institute.
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