Stocks/Shares Question!

Amit92

Hey,

I am 16 years old and I have about 3K to invest in a company and try and make some profit in a long-term period or even short-term period. I was wanting to know how old do you have to be to buy shares/stocks in a company and how?

Thanks

Amit

Aegis

I'm not sure there is a legal minimum age to own shares. I certainly had some in my name long before I turned 18, which I believe is the age you could vote at an AGM at...

However, just because you CAN do it doesn't mean you SHOULD. Investing directly in companies is very high risk, and an inexperienced investor could well lose a lot of money in a very short space of time. Consider your options very carefully before proceeding, and research the less risky options before diving in!

PBA

I'm pretty sure you've got to be 18 to buy shares in your own name. I know my Dad bought some shares for me when I was a kid, the share certs had his name followed by my initials. As it was him sorting it out though I'm not sure what sort of arrangements he made.

Lokolo

Amit92 wrote: »

Hey,

I am 16 years old and I have about 3K to invest in a company and try and make some profit in a long-term period or even short-term period. I was wanting to know how old do you have to be to buy shares/stocks in a company and how?

Thanks

Amit

You have to be 18 as this is the legal age to own a contract to something and be held to it.

Also you don't make profit on shorterm with shares i'm afraid. If I were you I would put it in a savings account until you are 18, and in the next 2 years read about it, or do Economics for A Level (if you are doing A Levels). Also read up on Funds, as these are less risky than buying individual shares.

Aegis

PBA wrote: »

I'm pretty sure you've got to be 18 to buy shares in your own name. I know my Dad bought some shares for me when I was a kid, the share certs had his name followed by my initials. As it was him sorting it out though I'm not sure what sort of arrangements he made.

That's quite a likely situation. However, even if his parents can buy shares for him, it might not be the best approach!

Amit92

Lokolo wrote: »

You have to be 18 as this is the legal age to own a contract to something and be held to it.

Also you don't make profit on shorterm with shares i'm afraid. If I were you I would put it in a savings account until you are 18, and in the next 2 years read about it, or do Economics for A Level (if you are doing A Levels). Also read up on Funds, as these are less risky than buying individual shares.

I am doing Economics at A-Level

Alot of people say to me that you can easily make a profit from shares because they say you buy low and sell high!

Lokolo

If that were the case, we'd all be rich Its the general idea but its not as easy as that.

For example:

http://uk.finance.yahoo.com/q/bc?s=VOD.L&t=1d

That was vodafones share price on Friday, if it came to 10am and you sold, good on you, but straight after that you go down hill and by the end of the day you haven't gained anything. However, change it to 5 year and you can see how much it changes!

Aegis

Amit92 wrote: »

I am doing Economics at A-Level

Alot of people say to me that you can easily make a profit from shares because they say you buy low and sell high!

Every trader works by that maxim, but the problem is working out what "low" is and what "high" is. Recently a lot of people thought 600 was a low price for Northern Rock shares. The bank was nationalised when the shares were trading at 90.

An extreme example, but still something to be aware of when you start looking into this.

The other thing to consider is trading costs. If you're going through Selftrade, for example (one of the more popular brokers), you'll have to make a minimum of £25 plus 0.5% of the buy value before you break even. If you wanted to trade your entire amount, that would be 0.8% increase over the buy/sell spread, which can be as much as 5% without too much trouble. You'd be looking at having to increase your purchased shares by close to 6% just to break even.

To make matters worse, you'd also be investing your entire capital in a single company. Imagine if the value of that company's shares dropped suddenly instead of increasing. If you sell, you have even less capital to play with and need to turn even more of a profit on your next trade to break even, which increases your risk of losing even more.

If you decided to play it safe and split your capital among several companies, you'd be looking at required growth of 7-8% very quickly before you could see a profit.

In short, I don't think it's a great idea for you to get involved without a lot more appreciation of the risks, and the difficulty in picking the right stock and the right time and then selling at another right time.