How to Invest When You're Young

No matter how old you are, you can save for your future with stocks and mutual funds. Here are some picks to get you started even if you're low on cash.

I am 11 years old and I would like to by stock in my favorite soda company. Unfortunately, I have no clue if a guy my age can buy stocks.

Sure, a guy your age can buy stocks. All you need to do is get in touch with a stockbroker to place your order.

Because you're a minor under 18 years old, you'll need to open what's known as a custodial account. That means an adult -- most likely one of your parents -- must open the account with you and be the custodian.

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When you buy shares of stock you'll have to pay the broker a fee or commission. And because you're probably investing a small amount of money, you'll want to keep your commissions as low as possible.

That probably means going through a no-frills online broker. A good choice for a fledgling investor like yourself is ShareBuilder (opens in new tab), which has no minimum investment, no account minimum and no inactivity fee. It costs just $4 to buy a stock, and you can even buy fractional shares. So, for example, if your soda company costs $12 a share and you want to invest $100, you could buy 8 1/3 shares.

Mutual Funds for Little Cash

I'm 18 years old and want to start investing in mutual funds, but I don't have a lot of money. Are there funds that will let me invest just a few hundred dollars? I want one with a good return that only needs to sit around for a year or two.

I can suggest several funds, but let me first say that investing in any mutual fund is a long-term commitment. Don't expect a quick profit. And if you'll need your money in less than five years, keep it somewhere safer than the stock market, such as a high-yield bank account or CD.

For longer-term investments, here are some good candidates:

  • AARP Aggressive (800-958-6457). This fund, which invests in a mix of U.S. and foreign stocks plus bonds, requires only $100 for entry.
  • Just $250 gets you into the Hodges fund (866-811-0224), which is run by a father-and-son team and invests in companies of all sizes, or Pax World Balanced (800-767-1729), a socially conscious fund that avoids companies that derive revenue from alcohol, gambling or weapons.
  • For $500, you can invest in either Homestead Value (800-258-3030), which owns mostly large companies, or Excelsior Value Restructuring (800-446-1012), which invests in companies that are being restructured or are in industries that are undergoing consolidation.
Janet Bodnar
Editor-at-Large, Kiplinger's Personal Finance
Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. While editor, Bodnar was honored by Folio as one of its Top Women in Media. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.