How to become an investor from scratch: where to start and where to invest.
You can start investing at any age. Only the mechanisms differ (until the age of 18, this is done through the mediation of parents), and the basic principles remain the same. To delve into the science of independent active investments through a broker, it is reasonable to start with virtual money on a demo account.
At what age can I start investing and trading on the stock exchange?
On the web, you can find a lot of inspiring stories about how young people become obscenely rich by investing in securities. In 2014, Mohammed Islam, a teenager from New York, became famous, who by the age of 17 had earned $ 72 million trading stocks for money for school lunches. He started his career as an investor at the age of 9.
Sudarshan Sridharan, a high school student from North Carolina, USA, earned $17,000 in 2016 by successfully investing in Tesla shares, another $20,000 was brought to him by investments in Google and Netflix. He entered stock trading at the age of 12, somehow persuading his parents to entrust him with retirement savings.
How does it work there? In the USA, it is impossible to open your own brokerage account or create an account in an investment application before reaching a solid 18 years. However, it is quite legal to open a so-called trustee account. When a child becomes an adult, he/she rewrites in his/her name.
One of the parents can open such an account. The amount that can be “donated” to it is limited to $ 15,000 per year (as of 2018). Yes, control remains in the hands of the trustee, the teenager cannot independently contact the broker to conduct transactions. But he becomes a full participant in the investment process legally, can analyze himself, form a portfolio and choose assets for it.
What does it take to become an investor? If we are talking about active investments, that is, independent trading on the stock exchange, then you can also become a full-fledged investor with us from the age of 18. Formally, the legislation allows transactions to be carried out from the age of 14 with the consent of parents or guardians. In fact, this is a rather demanding document. Just write in it “I allow my beloved child to do whatever he wants” will not work. Consent is required for the very fact of opening a brokerage account and for each transaction separately.
Teenagers most likely will not be able to earn millions on investments. We are talking about “investments of a healthy person”, manipulations with bitcoins and financial pyramids do not interest us. The Russian regulator limits the set of tools available to a novice investor. The riskier, therefore potentially more profitable options for him are still closed. For example, you will not be able to immediately buy shares of foreign companies through brokerage companies licensed by the Central Bank.
What options are available to a novice investor
How to become a novice investor? There are several options open to you for obtaining additional income:
1) Active investments, when a person chooses trading platforms, assets, buys stocks himself (recall that the choice of instruments is limited at first), bonds, or tries to catch the benefits of currency pairs on Forex.
2) Passive investments, implying the purchase of mutual funds, sectoral funds, ETFs, investment of money on deposit. Direct control and constant analysis are not required here. You can put money for a certain period and forget.
3) You can invest through crowdfunding platforms. In this case, investments are not in assets, but in an idea. If the project turns out to be successful, you can get the development stated in it, a new gadget.
In any case, the earlier you start investing, the better. The amount of initial investments, as a rule, does not matter in principle: frequency is important, and compound interest will do the rest of the work for you.
To become a successful “active” investor, you need to constantly learn and improve your skills. Age doesn’t matter here. Being a sophisticated 40-year-old citizen, you can easily reset your investment account by following the lead of unqualified “advisers” or mass information hysteria. In investing, it is good to have your mentor, mentor, as a coach in sports, who will share knowledge, experience at the first stages, check transactions for common sense and logic.
There are insurance investment products that allow you to earn a small income and provide additional protection to the child. It is more logical to purchase such instruments not through banks, but directly from insurance companies.
The method of investing money through crowdfunding platforms will also be useful. A teenager will face all the vicissitudes of business live, see how everything functions. Often such startups postpone the deadlines of projects, many are closed. A thoughtful analysis will allow you to understand which companies you can invest money in, and which ones you should not invest in when actively investing.
How to start active investments
At the age of 15-25, it is not particularly interesting what will happen there on the long horizon of life. I want to get a decent return on investment here and now. The option with active investments, independent securities trading through a broker is more attractive.
It is optimal to study not on real, but on virtual money. Almost all brokerage companies today offer the opportunity to open a demo account. On it, you can observe full-fledged movement in all markets, all transactions look like real ones, you can track operations and your effectiveness. In the “glass” in the trading application, you can see what the price of a share is right now, you can apply, buy, sell. Of course, liquidity is not taken into account there. But most often, novice investors will not have any problems with liquidity even on a real account.
On such an account, you can have fun as much as you want. Investment demo accounts usually show good results. Despite the fact that almost 90% of accounts with real money “collapse” without even six months. On real investments, human behavior, especially at a young age, becomes less rational. The pressure on the investor increases at times, it is more difficult to make decisions, there are more nerves. He begins to trust not his calculations, but information bacchanalia. They tell him from every iron that everything is gone, a recession is coming, Mr. Trump is introducing new duties, the economy is waiting for collapse.
His own rational analysis tells him that everything will be fine, but he suddenly begins to believe the TV “experts” and closes positions on the drawdown of the market. In a week or a month, the market will regain positions, but at the moment, especially when the loss is in front of our eyes, we tend to make rash decisions.
The same thing works in the opposite direction when, succumbing to a herd feeling of unreasonable optimism, a person enters the securities market at highs when many assets are clearly overvalued.
How to properly control a child’s investments
If a child wants to try himself in investments, the most reasonable tactic for parents is not to interfere. In this case, overprotection can do harm. Just make sure that the teenager does not have accounts, let’s say, with unofficial financial service providers. The state regulator strictly monitors that the investment market is transparent and civilized. However, theoretically, there is still a chance to get to the comrades with whom you will lose more money than you have, and with a large margin.
For example, the few remaining official state forex dealers have a loss from investments limited to zero. The same story in the legal brokerage business. Even if there is a margin call, when the investor took the securities with leverage secured by the agreed amount from the profit, and the market turned in the opposite direction to the calculations, the shares went down a lot, everything in excess of the deposit for losses is already the broker’s problem. Most likely, he will just forcibly close all your transactions.
The central Bank has seriously taken up the problem of protecting novice investors and increasing the “survival period” of private investments. Unconscious brokers bred people either on commissions, or offered investors products that were unprofitable for them, but with a high margin for themselves. In this regard, in recent years, the regulator has tightened the nuts.
The state controls the set of tools available to a novice investor. The National Association of Stock Market Participants (NAUFOR) has developed an investment profiling standard so that a person can assess his attitude to risks, protect himself as much as possible from products that are not suitable for him yet.
As in any activity, mistakes in investing are inevitable. This must be taken for granted. The main thing is that each individual failure does not become fatal. To prevent this from happening, it is enough to follow a few basic rules, to be able to assess the risk that is always there, not to invest money in incomprehensible, unfamiliar tools.
Diversification is a necessary condition for competent investments. Even if you made a mistake, the cost of the error will not be more than 5-10% of all funds for a single story. Even professional managers make mistakes after 10-20 years of work and continue to learn.
How to become an investor from scratch: where to start and where to invest.