So who wants to be a millionaire?
Want to get rich? Contrary to popular belief, it’s not all about making the big bucks right off the bat. A little bit of money now can turn into a huge lump sum over time.
Ready to start? Then let's talk stocks, the best kinds of long-term investments. When you're ready to charge down the path of becoming a millionaire, start off with mutual and index funds—and save the risky investments for later. Slow and steady wins the race, right?
Think you're ready to invest? Here's what you need to consider first. If you need your money within five years or less, stocks might not be for you. Playing the stock market is a long-term game, and only really pays out over many years. If you need cash quick, keep it in a bank account or consider trying bonds.
If you're underage—aka under 18 or 21 depending on where you live—you're going to need an adult's help. Minors aren't allowed to enter binding contracts, but with the help of a parent or guardian, you can open accounts at financial institutions. FYI, this is called a “custodial account,” meaning the account is opened by a minor and an adult. Sounds too complicated? You can also have your trusted adult informally buy into stocks on your behalf. But if you're investing in the same stocks, be careful—keep a clear and agreed upon record of which stocks (and how many) belong to whom.
Let’s get down to the nitty gritty.
If you want to invest money in a mutual fund (such as a glorious index fund), there are a few things to consider. What kind of money do you have as an initial investment—and what are the minimum intial investments for the stocks you're looking at? Is a brokerage right for you, or should you invest directly with the fund's company? A brokerage is a firm that facilitates the buying and selling of securities (such as stock) while charging customer fees (called commissions) for its services. Buying into a brokerage can help you invest your money into multiple funds at once. With brokerages, you can buy and sell at any time, moving money between stocks and funds at will. Buying directly from the company can be more straight-forward. All you need is the proper paperwork and you're good to go.
Even if you don't know it, you've probably heard of brokerage firms. Any of these names sound familar? Charles Schwab, Fidelity Investments, E*TRADE, Harrisdirect, Ameritrade, TD Waterhouse, Datek, Merrill Lynch and Salomon Smith Barney.
If you're ready to open a brokerage account, here's how you can start: Do your research! Find out what brokerage firm you'd want to work with—and what their terms are. Then, fill out your application and send it in, making sure to work with an adult if you need. Once your application is accepted, the brokerage firm will give you your account number and password to help you access the account, especially online.
Once you've set up your account, you're ready to invest in a stock or mutual fund. You can call your broker or log in online—or even swing by a local branch if you live nearby—to get started. Don't be scared to call the customer service line if you need extra help! To "trade" stocks (aka buy and sell), you'll place an order specifying exactly what you want to buy and how much, plus any special instructions if you have them.
And there you have it! See, not as scary as it seems, is it?
So are you ready to be a millionaire? Start now to make it big—and don't forget to ask an adult if you have any other questions.