Can a 16 year-old open an account and invest in stocks?

Question

thank in advance.

Answer 1

Hi,

There is a way to invest in stocks without a broker and if you keep reading I will tell you how.

The method is called DRIPs.

A DRIP is a Dividend Reinvestment Plan. It offers indidual investors, even a15 year old, a cost-effective way to build equity in a stock.

The DRIP is run by a corporation and it allows people to make cash purchases of stock or to reinvest dividends (if any). I have a DRIP program with Goodyear Tire and Rubber, but it ran into problems a few years ago and stopped paying dividends.

You only need one share of stock to become eligible. In some cases it can be purchased directly from the company, but normally needs to be purchased through a broker. You could have your parents open up an brokerage account and purchase the share in your name.

There are no fees or commissions when you reinvest your dividends.

There are lots of companies that do this - over 1000. The company likes them because it's a low cost way to get capital or cash for their business. Because of that companies welcome new investors into their DRIP plans.

What makes DRIP popular is that most of the plans require very small cash outlays even as low as $10, some as low as $5.

Some of the world's largest companies like IBM, AT&T, and McDonald's have DRIPs.

Very wealthy investor like DRIPs because it allows them to bypass the broker's commisssion which lowers the investors cost of investing

Another benefit is known as dollar-cost averaging where a fixed amount is invested on a regular basis. The stock rises and falls with the market, but by investing periodically, the average cost of the shares tends to average out and not be affected by the market swings.

Liquidating or selling your shares can be a problem because brokers want to get a commission for selling and buying stock for investors, but the company will buy them back in some cases.

Dividends are considered income and used to be taxed by the IRS, but a change in the law makes them non-taxable. But if you sell your shares and make a profit you have to pay tax on the profit. There are two types of taxes for profits or capital gains: one is short term and costs more than the other kind of capital gain which is called a long-term capital gain and that occurs when you hold a stock for more than six months.

Goodyear Tire and Rubber's stock symbol is GT, but don't invest in this one because it doesn't pay a dividend yet..

YUM is the symbol for Yum! Brands, Inc and they own Pizza Hut, Taco Bell, and Kentucky Fried Chicken on the New York Stock Exchange (NYSE)

This Web site has a list of DRIPs: http://www.directinvesting.com/

To find DRIPs that pay good dividends, look in Investors Business Daily, Barrons, or the Wall Street Journal. There is a column that has dividends and return %. Most don't pay as much as a Treasury Note or a CD, but they have earnings growth to offset that income disadvantage. Than look them up in the URL above.

Google this keyword "DRIP lists" for more Web site. Be careful. Some of them charge a fee to sign up.

Kindest Personal Regards,

Walt Brown
Site Build It Certified Webmaster
[e-mail]

Answer 2

I believe you have to be 18...my mom tried to get me and my sister seperate credit card accounts and just regular checking accounts and he said my sister could but since I'm only 16, I could only get a savings account...so I highly doubt you could invest in stocks. Sorry! :(

Good luck! ;-)

Answer 3

I recall someone younger than that somehow thru his dads accounts he not only was trading...he was manipulating the market on message boards and was making a hefty amount of cash....until the feds came knocking and took the computers and jr away.

Answer 4

Requires parental permission. Set it up under the Uniform Gift to Minors Act; the stockbroker will know how to do this.

Answer 5

Im pretty sure you cant, you need your parents to do it on youre behalf, either that or you need some kind of parent consent form filed.

Answer 6

No, not without it being under your parents name.