Fidelity Investments recently lowered the barrier to entry into the stock market when it launched Fidelity Youth Account, an investing and savings account for 13- to 17-year-olds.
The no-fee account allows teenagers to buy and sell stocks, ETFs and Fidelity mutual funds. Though only available to teenagers with a parent who also has a Fidelity account, Fidelity is pitching the venture as an educational opportunity, where parents can monitor their child’s activity.
Fidelity Investments isn’t alone.
A new wave of young investors has emerged during the COVID-19 pandemic, thanks to low-fee mobile trading APPs such as Robinhood and eToro, as well as chatter from social media platforms.
Of the 4.1 million new accounts that Fidelity added in the first quarter of 2021, 1.6 million were opened by retail investors 35 and younger, an increase of more than 222 percent from a year prior.
The largest cluster of teenagers finding value from United States stock markets are American adolescents, but children from the United Kingdom to the United Arab Emirates are also making their first investments.
There are many factors pushing new investors into the stock market. According to a report from the Financial Industry Regulatory Authority (FINRA), some of the biggest drivers were the ability to invest on a small scale and buy stocks at attractive price points during market dips.
Teenage traders are also inspired by YouTube videos on financial independence and TikTok stories of young millionaires, seeking out alternative news sources and online tips before making an investment.
The COVID-19 pandemic, and along with it the shutdown of both international travel and internal movement within countries — at least, those that have gone into some form of lockdown in the preceding 18 months — has been the biggest driver of new investors entering the stock market.
According to the same FINRA study, 57 percent of respondents opened a new taxable investment account in 2020.
Teenagers represent a whole new segment given the age restrictions that are often in place for minors trying to trade, as most platforms require the user to be at least 18 years old.
According to FINRA, the three most frequently reported reasons that prompted new investors to open an account were the ability to invest with a small amount of money, wanting to invest for retirement, and dips in the market that made stocks cheaper to buy
Additionally, over the past year, FINRA said while 52 percent of investors aged 60 and over held accounts with $25,000 USD or more, less than one- tenth of that number (4 percent) of investors aged 18–29 held similar balances. Conversely, only 6 percent of investors aged 60 and over held less than $500 USD in their account, while nearly seven times that proportion of 18–29-year-olds held under $500 USD in their account.
AmChamUS supports growth in the U.S. financial sector, which is a major influence on the country’s economic prosperity.
AmChamUS will continue to work with financial regulators and federal officials to ensure products targeting minors have strong data privacy protections and engage in a manner that contributes to developing education so as to spur future financial independence.
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