HOW TO INVEST IN STOCKS
- KidVestors
- Dec 29, 2025
- 6 min read
Updated: 5 days ago
What you'll learn:
Investing can feel overwhelming at first. Between confusing charts, finance buzzwords, and TikTok gurus promising overnight riches, it is easy to think you need a finance degree or a ton of money to get started. The truth is much simpler. The good news is this. Learning how to invest and how to invest in stocks does not have to be complicated, expensive, or reserved for finance pros. Anyone can get started with the right foundation, a clear goal, and a little patience.
What Is a Stock?
A stock represents ownership in a company. When you buy a stock, you are purchasing a small piece of that business. If the company grows and becomes more valuable, your stock can increase in value. If the company struggles, the value of your stock can decrease.
Think of it like this. Imagine a pizza shop that wants to expand. Instead of taking out a loan, the owner sells slices of ownership to investors. If the shop does well, those slices become more valuable. That is essentially what happens when you buy stock in a company like Apple, Nike, or Disney.
Stocks are one of the most common ways people build long-term wealth because they allow everyday investors to participate in the growth of businesses over time.
How To Invest in Stocks
When people ask how to invest in stocks, they often assume they need thousands of dollars, advanced math skills, or insider knowledge. None of that is true.
Get Clear on Why You Are Investing
Before choosing stocks or opening an account, start with your purpose.
Ask yourself:
What am I investing for?
When will I need the money?
Am I investing short term or long term?
Your answers will shape every decision that comes next.
Before you buy anything, you need to know your why. Are you investing for retirement, college, a first home, or long-term wealth for your kids? Your timeline and purpose matter more than the specific stock you choose on day one.
Learn To Invest : First, Decide Your Investment Goals
Your investment goals are the foundation of your strategy. Strong goals help you stay calm when the market moves up and down.
Think about your goals in terms of:
Purpose
Retirement
College savings
A first home
Long-term wealth building
Timeline
Short term: under 3 years
Medium term: 3 to 10 years
Long term: 10+ years
Risk tolerance
Conservative
Moderate
Aggressive
For kids and teens, goals might include learning how investing works, saving for college, or building wealth early so compound growth can do its thing.
Your Goals Determine What Investment Account to Open
Once your goals are clear, the next step is choosing the right type of account.
Why? Because each account has different rules, tax benefits, and use cases.
Custodial Brokerage Account
A custodial brokerage account allows an adult to invest on behalf of a child.
Key features include:
The account belongs to the child
The adult manages it until the child reaches adulthood (18 or 21 depending on your state)
Money can be used for almost any purpose
You can invest in:
Individual stocks
ETFs
Mutual funds
Index funds
This is often one of the most flexible options for teaching kids how to invest money in real time.
Custodial Roth IRA
A custodial Roth IRA is designed for kids who have earned income and a way to start putting money away for their retirement early.
Important things to know:
The child must have earned income
Contributions are made with after-tax money
Growth and qualified withdrawals are tax free
It is ideal for long-term investing
This account is powerful for teaching long-term thinking and retirement basics early.
529 College Savings Plan
A 529 plan is designed specifically for education expenses.
Benefits include:
Tax-free growth when used for qualified education expenses
Can be used for:
College
Trade schools
Some K through 12 expenses
Limited flexibility for non-education uses
This is a great option if education is your primary goal.
Coverdell Education Savings Account
A Coverdell is similar to a 529 but with different rules.
Key features:
Lower contribution limits
Can be used for both K through 12 and higher education
More flexibility in investment choices
Choosing the right account is a critical part of learning how to invest the smart way.
How to Know Which Stocks to Buy
Once your account is open, the next big question is what to invest in. The goal is not to pick the perfect stock. The goal is to build a portfolio that matches your goals and timeline.
Individual Stocks
Buying individual stocks means investing in specific companies. This can be exciting and educational, especially for kids and teens, but it also comes with more risk.
Pros:
Educational and engaging
Higher growth potential
Easy to connect investing to brands you know
Cons:
Higher risk
Requires more research
Index Funds and ETFs
Index funds and ETFs track a group of companies instead of just one.
Popular examples include funds that track the S&P 500.
If you are wondering how to invest in S&P 500, here is the key takeaway:
You do not buy the S&P 500 directly
You invest in an index fund or ETF that tracks it
This gives you exposure to 500 of the largest U.S major companies by market capitalization at once
This approach is often recommended for beginners because it offers instant diversification.
How Much Do I Need to Invest in Stocks?
This is one of the most common questions beginners ask.
The good news is:
Many platforms allow you to start with as little as one dollar
Fractional shares make investing accessible to almost everyone
What matters more than how much you start with is:
How consistently you invest
How long you stay invested
How Much Money Do I Need to Make $100 or $200 Per Month?
This depends on whether you are focusing on growth or income.
If you are aiming for dividend income, here is a rough example:
To earn $100 per month or $1,200 per year at a 4% yield:
You would need about $30,000 invested
To earn $200 per month or $2,400 per year at the same yield:
You would need about $60,000 invested
These numbers are not guarantees, but they help set realistic expectations. Many investors start by focusing on growth first and income later as their portfolio grows.
What Are Dividends and DRIP?
Dividends are payments some companies make to shareholders from their profits.
Key points about dividends:
Not all stocks pay dividends
Dividend-paying companies are often more established
Dividends can be paid quarterly or monthly
A DRIP, or dividend reinvestment plan, automatically reinvests those dividends to buy more shares.
Benefits of DRIP include:
Compounding growth
Buying more shares without extra effort
Ideal for long-term investors and young investors
Stocks vs Bonds vs Mutual Funds vs Index Funds vs ETFs
Understanding these options helps you build a balanced portfolio.
Stocks
Stocks represent ownership in a single company. They offer high growth potential but can be volatile.
Bonds
Bonds are loans you give to governments or companies in exchange for interest payments. They are generally more stable but offer lower returns than stocks.
Mutual Funds
Mutual funds pool money from many investors to buy a diversified mix of investments. They are professionally managed but often come with higher fees.
Index Funds
Index funds are a type of mutual fund that tracks a market index like the S&P 500. They are lower cost and designed to match market performance rather than beat it.
ETFs
ETFs, or exchange traded funds, are similar to index funds but trade like stocks. They offer flexibility, diversification, and typically lower fees.
How KidVestors Teaches How To Invest In Stocks and More
Understanding concepts is important, but practicing them is where real learning happens.
KidVestors teaches kids and teens how to invest in stocks through:
Interactive lessons
Real-world examples
Gamified learning through a stock market game
A risk-free investing environment
Students earn virtual currency called KV Bucks and practice building portfolios, managing risk, and understanding markets before investing real money. This hands-on approach helps turn abstract ideas into real skills.
Learning how to invest money , specifically how to invest in stocks, does not require perfection or large sums of cash. It requires clear goals, consistency, and a willingness to start.
Whether you are investing for yourself or helping the next generation build financial confidence, the basics matter. Define your goals, choose the right account, diversify your investments, and give your money time to grow.
The best time to start investing was yesterday. The second best time is today.
Ready to see what KidVestors can do?
STOCKS FOR KIDS AND TEENS
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