Teenagers can make money on the stock market too

Kayla Tippens - Senior | Opinions

Starting at age 18, anyone can invest in the stock market and increase their net worth. However, many teens under the age of 18 have been able to make money with the help of their parents. The success of these teens has made many others question how they did it.

Simply learning to understand the stock market and how it works kick-starts the financial success of many teens and adults. However, there is a large misconception around the stock market and who it is for.

Many are under the impression that the stock market is extremely risky, and only Wall Street men in suits can make a profit. Contrary to popular belief, the stock market is considered a safe long-term investment.

According to investment bank Goldman Sachs, the ten year stock market returns have averaged 9.2% over the past 140 years.

In the most simplistic sense, the stock market is comprised of private citizens purchasing shares of companies. A share is the smallest unit of ownership of a company's stock.

The earlier one can invest, the more money they can make. Compounded interest can result in great profits over a long period. Investing just a couple years earlier can make the difference of thousands of dollars.

A common way for people to invest is with an IRA or a 401k. Both an IRA and a 401k are retirement accounts that gain interest through investments. An IRA can be set up by any individual that is 18 years old or older, and a 401k is set up through an individual’s place of work.

Brandon Fleisher is a 17-year-old who more than tripled his money in two years. His parents gave him $48,000 from their retirement account to invest with. With that money, he made $147,000 by making smart investments.

Retirement accounts are not a special way for people to invest, and most people want to make extra money for when they stop working. To achieve this passive income, an individual only needs money to start investing.

There are different ways for people to invest their money, but the most common and safest way is through mutual funds. According to the Merriam-Webster dictionary, a mutual fund is an open-end investment company that invests money of its shareholders in a usually diversified group of securities of other corporations.

A mutual fund owns shares in a wide variety of stocks. The diversification makes them safe because if one business goes under, then they still have shares in a multitude of other companies. A mutual fund is also a great option for smaller investors because they do not have to be able to purchase a full share. Through the mutual fund they could own 0.1% of a share in several different companies.

Another way for people to invest is through individual stocks. Purchasing shares in individual stocks offers a higher return, but higher risks. Investing in individual stocks places the responsibility of studying the market on the investor.

Teenagers that make big money from investing typically invest in individual stocks. In North Carolina, 16-year-old Sudarshan Sridharan made almost $250,000 investing with his parents' retirement accounts. He’s owned stock in Tesla, Netflix, and Google since 2013. However, Sridharan aslo lost $20,000 making bad trades.

Still, most teenagers do not have access to their parents’ retirement accounts, and for good reason. Teenagers should use their time learning about investing, so they can make educated financial decisions.