By Louis H-P on August 11, 2020Reading Time: 3 minutes
How old do you have to be to invest in a stock portfolio is a question which has been answered conclusively recently! The widespread availability of information online means any younger investor can get started. Although wise old heads will often prevail in volatile times, gaining experience young is no bad thing.
Never too early to start
Helpful tips to avoid the pitfalls
Historically, investing in the stock market was performed by men in pin-stripped suits such as stockbrokers, portfolio managers and your grand-father. Your grand-mother probably also had her fair share of granny stocks too. This often lead to buy and hold strategies being the norm with the lower associated volatility.
Today the combination of interest on saving accounts being so low, and massive marketing campaigns by do-it-yourself investment platforms, have led to many younger first time investors taking the plunge.
Be careful of following the crowd.
Many of this newer younger generation buy the same headline grabbing stocks. Slighty worryingly, there is a sense that many are after the fast growing companies, many of whom have become overvalued stocks.
As a young man on the make, Warren buffet actually sought out Benjamin Graham. He was keen to learn in person from this famed investor who had a clear value strategy, which focused on finding undervalued stocks, by performing fundamental analysis.
Although today’s news is filled with stories of younger investors taking he plunge, one German grandmother only started in her 50s once her first career was over. This has also led her into becoming an author on the subject! How old do you have to be to invest in stocks traditionally focused on the young being too young, rather than the older generations starting later!
Many of the readers of this article will be contributing to a work place pension. This is where an employer will pay in a percentage of your salary into your pension which in turn will be invested in the stock market. These pensions are often set up with a wide amount of choices, usually in funds. Few people actually check up on what their pension is invested in. Rather than starting with a DIY trading account, why now take an interest in your pension first? Few of the pension providers will allow you to take big risks and so you will gain a good grounding on sensible investments to hold.
None of these will necessarily shoot the lights out, but getting rich quick is not a reason to invest in the stock market. You will also have the possibility of starting where every first time investor should: Understanding what it is you hold before deciding to change how your (pension) investments are placed.
Any first time investor, whatever the age, should start small. Only risk a small part of your savings. 5% would be a good start. Although this may not amount to much for smaller investors, it is much better than losing everything because you got in too quick.
Remember it is better to have an opportunity loss than an outright loss. First rule of investing should be: don’t lose any money. The second rule: don’t forget the first. Warren Buffett abides by these. Giving yourself a margin of safety will also help.
Before investing, finding out about yourself is key. Are you able to control your emotions and invest in a calculated manner? Investing in the stock market is no place to learn. Have you had opportunities in your life to test yourself in stressful situations? What you will learn there will help with how to start investing.
There is no obvious age to how old do you have to be to invest in stocks. If you follow a disciplined approach by ignoring the most volatile stocks, and focusing on understanding the financial statements of a company, then you increase your chances of success.
Give yourself time to develop as an investor. You will know little when you first start, but over time you will build knowledge. This will help with identifying creative accounting and keeping your money safe. Fundamentally it is how you approach investing which will influence your success or downfall.