How do students start investing in stocks?

1. 1. Conditions for students to start investing in stocks

There is no annual income requirement for stock investments. Therefore, even students without income can participate in stock investment. In addition, for securities companies, even minors can open a securities account depending on the conditions, so even minor students can start investing in stocks.

However, there are the following rules when minors start investing in stocks.

Submit parental consent

Parents have opened a securities account with the same securities company

Only physical transactions are possible

Therefore, minors cannot start investing in stocks without telling their parents. In addition, it is necessary to gain a certain amount of investment experience in order to carry out margin trading.

1-1. How much money do students need to start investing in stocks?

Stocks listed on the stock market in Japan have various stock prices ranging from hundreds of yen to tens of thousands of yen. With some exceptions, the number of shares constituting one unit of domestic listed shares is unified in units of 100 shares, so investment funds of tens of thousands to millions of yen are required.

However, if you use a securities company that provides a service that allows you to trade shares less than one unit, you can purchase shares from one share, so you can start investing in shares from a small amount of about several hundred yen.

2. Benefits of students starting shareholder investment

There are the following benefits for students to start investing in stocks:

Increase your income source

Can study the economy

Can be used for job hunting

Easy to benefit from long-term investment

More choices for people

Let's take a closer look at each.

2-1. Increase your income source

By investing in stocks, you may be able to obtain profits such as gains on sales and dividends, and you can expect the benefit of increasing income sources other than part-time jobs and remittances.

2-2. Can study about money

By starting a stock investment, you can acquire knowledge about money such as profits, interest rates, and commissions. In addition, you can learn while experiencing various things such as knowledge about the economic situation in Japan and the world, knowledge of management and business, and the importance of risk hedging. If you have this knowledge, you can use it in your future life.

After becoming a member of society, it becomes difficult to take time to study. Gaining knowledge of money that cannot be learned at school is an advantage of investing in stocks among students.

2-3. Can be used for job hunting

If you have the information obtained from stock investment, it will be easier to select a company to apply for job hunting.

When you invest in a stock, you will collect information about the company and decide whether to invest in that stock. In the process, you can get information on various companies and industries, and knowing about companies and industries in interviews has a positive effect. It is an advantage for students that stock investment can also be used for job hunting.

2-4. Easy to benefit from long-term investment

The basis of investment is compound interest management by long-term investment. Starting a stock investment as a student makes it easier to benefit from compound interest.

Compound interest means that interest accrues on interest. If you make a 10% profit one year later by investing 1 million yen in stocks, your principal will be 1.1 million yen. In the second year, you can invest 1.1 million yen, which is 1 million yen plus 100,000 yen, and if the profit margin is the same, the profit will be 110,000 yen. By repeating this, you can increase your profits steadily. This is the power of compound interest.

The longer the investment period, the greater the power of compound interest. In other words, it is important to start long-term investment as young as possible.

2-5. More choices in life

If you succeed in investing in stocks, you will gain a lot of knowledge, and maybe you will get a lot of assets. Knowledge and assets make it easier for you not only to continue working in one company or industry, but also to choose the job you want to do or start a business.

Equity investment can be the foundation for more choices in life.

3. 3. Precautions for students to start investing in stocks

On the other hand, when students start investing in stocks, the following points should be noted.

Loss may occur

May be out of parental support

Parental consent required for minor equity investment

I can't concentrate on my studies

Let's take a closer look at each.

3-1. Loss may occur

In the world of asset management, there are the terms risk and return. Return represents "results obtained from asset management", and risk represents "variability of uncertainty". Stocks have credit risk (the possibility that the invested company will go bankrupt) and price fluctuation risk (the stock price at the time of sale may fluctuate from the stock price at the time of purchase).

The possibility of obtaining "profit" such as dividends and gain on sale from stock investment also means that "loss" will occur as well. It's important to understand that investing in stocks doesn't necessarily mean you're making a profit.

3-2. May be out of parental support

If you make a profit from your equity investment, you may be out of your parent's support.

Students have less income, so it is common for them to be dependent on their parents. Students in this case are called dependent relatives, and parents can receive a dependent deduction, so they can reduce taxes paid.

However, in the following cases, you will not be dependent on your parents (based on the tax system as of February 19, 2021).

When the total income of dependent relatives exceeds 480,000 yen

When the total income of specific dependents exceeds 630,000 yen

Dependents are people aged 16 and over, and specific dependents are people aged 19 to 23.