Do you want to turn $1,000 into over $5,000 in 20 years while doing barely any work? Well, there is only one way to do that: the stock market.

According to the data aggregator Official Data, if $1,000 was invested into the stocks that make up the S&P 500 index (which are the 500 largest publicly traded companies in the US) at the start of 2002, by the end of 2022 it would reach a value of $5,176.61. On an even longer scale, if only $100 was invested into the S&P 500 stocks in 1928, it would have reached a value of $624,534.55 by 2022 with dividends reinvested. So, with that crazy statistic from New York University, what is the stock market and how can you, as a teenager get invested in it?

Firstly, a great way to practice buying and selling stocks or to test a strategy is through one of the many fake money portfolio websites. MarketWatch has a great version of it, and is what is used in Niles North’s Investing class taught by one of the Niles North Business Education teachers, Mr. Pahl. 

Next, what is the stock market? The stock market itself is the system where stocks can be bought and sold, which includes the brokers (such as TD Ameritrade, E*Trade, Fidelity and many others) which facilitate trading, and the exchanges (in the U.S. it is mainly the New York Stock Exchange or NYSE and the Nasdaq) which the stocks are listed on.  

Hold on, what is a stock? A stock is a share or a tiny piece, in a company, which can be owned by anyone. Companies decide to go public (through an initial public offering, shorted to IPO) and issue stock as a method of fundraising.

Why would you want to own a piece of a company? When people buy stock, they expect the value of a share to grow and to an extent, they expect the company itself to grow. While the value is not directly tied to the financial performance of the company (price movements are based on the purchase and sales of shares by investors), they are highly correlated. Generally, when a company is expanding its locations, earning more money, having better profit margins or things of that nature, people will have a better outlook of the future of the company and buy the stock with the future expectations of continued growth or strength.

What kinds of companies issue stock? Stocks are issued from a wide variety of companies throughout all sectors and industries and all sizes of companies. There are the well-known companies that are publicly traded, such as Apple, Amazon, Tesla, Nike, Starbucks and many others. There are random companies that realistically nobody has ever heard of (Suzano, for example, is a Brazilian paper company and is traded on the NYSE).

How can teens invest in stocks? If a teen is under 18, they would need their parents to create a custodial brokerage account in their names. It is very similar to a normal brokerage account, except the ownership will transfer to the child at the age of maturity (which is 21 in Illinois). If a teen is over 18, they can set up a brokerage account the normal way. And, as was mentioned earlier, a great way to get some practice is with a fake money portfolio. 

How does one pick stocks? There are many different theories within the investing world on how to pick stocks. The two main camps are growth and value. Growth investors look for companies that are expected to have a high rate of profit growth in the future, which tend to be riskier. On the other hand, value investors look for companies that have a long history of stable returns. A common philosophy of beginning investors is to pick companies that they have heard of (McDonald’s, Coca-Cola, Verizon, etc.) which tends to be a good idea. Popular companies with a strong brand image tend to perform well. 

What are some good resources to learn more? Yahoo Finance has information on just about every stock listed on major exchanges. Just search in the search box to find the company and look at all the different statistics. They also have a wide variety of financial news articles from different sources. Investopedia has a ton of articles on all different kinds of personal finance and investing topics. It has a lot of information about different investing strategies and what different statistics mean. As always, whenever reading personal finance or investing information, do not take it as financial advice. If something seems too good to be true, it probably is. 

Overall, the stock market is a fascinating topic and area of study. The sooner a teen starts investing, the more money they will have in the future due to compound interest. Even just putting some money from a birthday, holiday or summer job into the stock market can help a teen financially prepare for the future.