Jake Schlein started investing when he was 14 with the help of a $ 10,000 gift and a custody account opened by his father.

He initially played it safe and stuck to established companies like Apple Inc. and Amazon.com Inc.

Jake bought 33 shares for $ 87 each last month after he and his friends saw the hype on Twitter,

Discord and Reddit’s infamous WallStreetBets forum. After a wild ride that saw shares soar to $ 483 on Jan. 28, GameStop closed at $ 53.50 on Thursday.

The now 16-year-old says he has no intention of selling the stock anytime soon – despite his father, a former Citigroup Inc.

Executive and longtime finance professional, has suggested he pay off.

Jake Schlein, left, began investing when he was 14 with the help of a US $ 10,000 gift and a custody account opened by his father Michael Schlein, right. Jake bought 33 shares in GameStop Corp. last month. for $ 87 each.


Photo:

Amy Lombard for the Wall Street Journal

“The stock price doesn’t really matter at the moment,” said Jake, who, like many other investors, wasn’t put off by GameStop’s recent volatility. “I’m definitely going with it.”

The day trading frenzy that sparked stocks like GameStop, sparked a de facto war between hedge funds and Reddit traders and galvanized securities regulators, is capitalizing on the capital of a growing number of young investors. Many of them are trying their hand at trading for the first time. And they have a completely different view of the markets than their parents, to whom investing often looked more like contributing to a 401 (k) account without diving into the trade du jour on social media.

“He actually believes he is making history,” said Linda O’Flanagan, a New Jersey resident whose 16-year-old son had sold all of his modest holdings last month to buy a single GameStop share and join the frenzy . “I said, ‘Don’t be silly’ but what do I know?”

Trading stocks has seldom been so much fun.

Ms. O’Flanagan’s son Connor holds up GameStop’s stock price on a second screen so he can track the movement and answer questions on online courses. He swears he even saw his math teacher take a look at GameStop’s stock price at one point in class.

“It’s cool how the internet came together … and it could topple Wall Street,” said Connor. He only intends to hold GameStop for a short time. “It’s basically a ticking time bomb,” he said of the stock’s rally. His plans for a win to come out with? Put the money right back in the market.

Mrs. O’Flanagan has other dreams. “Hopefully he’ll make enough money to pay for college. What a load! “she joked.

“The Fed just did what?”

It’s no coincidence that teenagers like Jake and Connor got the chance to step into the GameStop mania. This generation grew up in a time when trading has become more accessible to the masses as before, thanks to the increase in no-commission trading, the ability to buy shards of traditional stocks for as little as $ 1, and the proliferation of free trading apps like Robin Hood. The average age of Robinhood’s users last year was 31 years, far younger than the average of older rival Schwab’s 52 years.

Jake Schlein monitors his investments on one screen and does his schoolwork on the other. He has no plans to sell his GameStop stake anytime soon, despite the fact that his father has suggested that he cash out.


Photo:

Amy Lombard for the Wall Street Journal

Zachary Cox, a 12-year-old from the UK, only had 40 pounds ($ 55) to play when he convinced his mother to open a deposit for him on UK platform Trading 212 last year.

He’s invested in everything from UK stocks to payment company Square Inc. and electric car maker Fisker Inc.

He’s even invested a tiny fraction of his portfolio – less than 1% of that – in AMC Entertainment Holdings Inc.

after seeing the hype surrounding the stock.

It has paid off so far: Zachary’s portfolio has more than doubled in the eight months since trading began.

“By 18, I might have enough money to go to university,” he said.

Social media is another tool that makes trading accessible to more young investors. Online communities and platforms like WallStreetBets, Discord, Twitter, and even Reddit’s TikTok have exploded with posts from users sharing everything from their latest portfolio recommendations to screenshots of their staggering losses. They have made it difficult to ignore the stock market, especially during particularly volatile periods like last week.

At the age of 13, Mya Parker was already active on Twitter and YouTube. In fact, she said she learned almost everything she knows about investing from watching YouTube channels like Financial Education, which feature videos with titles like “The Fed Just Did What! Federal Reserve Go Brrrrrr ”and“ Are Airline Stocks Buying Cheap Now?

Now she runs her own YouTube channel where she posts videos reflecting on her investments in companies like the electric vehicle maker Arcimoto,

year Inc.

and Dropbox Inc.

The recent surge in GameStop and other stocks affects investors in opposing camps: traditional Wall Street firms and small investors who oppose the system. WSJ asked the same series of questions about WallStreetBets’ role in the trading frenzy. Photo illustration: Carlos Waters

Gavin Mayo, a 19-year-old student, made a name for himself on TikTok. He’s shared everything from videos parodying WallStreetBets to short and snappy explanations of gamma squeezes for his 230,000+ followers on the platform.

Mr. Mayo admits his parents aren’t exactly thrilled that he spends so much time trading and posting online. To put her mind at ease, he tries to stay up to date while keeping a busy schedule for the release.

“I don’t know if you really understand what I’m doing,” said Mr Mayo of his parents’ views on his trading adventures. “They were just safe with their 401 (k) s.”

Meet the parents

Parents have some control over their children’s investments. In the United States, minors require an adult – usually a parent – to open a depot for them. The adult retains control of the account until the minor reaches the age of the majority. (It’s 18 in most states, 21 in some).

But any money in the account legally belongs to the minor. This means that parents cannot withdraw money once they have deposited it in the account unless they are using it for the direct benefit of the child.

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If you have a teen trader in your life, how do you inform them of market risk? Join the following conversation.

Gains on investments are also taxable – something financial advisers fear that young investors trying to make money quickly may not be aware of it. While gains from stock sales and dividends up to $ 1,100 are tax-free in many cases, the next $ 1,100 is usually taxed in the child’s tax bracket – usually between 10% and 12%. In addition, the so-called kiddie tax comes into force. This means that the child’s capital income is taxed at the parent’s marginal tax rate instead of the child’s lower tax rate.

Even if minors don’t sell their stocks, custody accounts can cost those applying for college financial aid.

Deposit accounts are considered the child’s assets. The larger the portfolios, the less aid is eligible for them. Some financial planners estimate that grant payouts can be reduced by up to 20% of the funds in a deposit.

“You have to be ready to lose everything”

The profits of individual investors this year have been enormous. But the losses were just as punishable for those who were unprepared.

GameStop, for example, saw a penal reversal of its rally in late January. Investors who followed the online crowd also suffered huge losses last year as oil futures quickly fell below zero and soaring stocks like Hertz Global Holdings Inc.

and Eastman Kodak Co.

collapsed.

That didn’t stop parents from supporting their children’s forays out into the fields. Some are simply happy that their children have found a new hobby – even if they see their investment style as gambling rather than anything else.

“I haven’t seen Connor this excited since the pandemic started,” Ms. O’Flanagan said.

What if Connor’s investments don’t work? “He’s not going to lose thousands or millions of dollars,” she said.

Jake, the 16-year-old in Brooklyn, has more to lose. Since beginning his investment journey, he has more than doubled the value of his portfolio. However, according to the agreement with his father, he will not withdraw money from his account until he is 25.

“You have to be willing to lose everything,” said Jake.

– Michael Wursthorn contributed to this article.

Jake Schlein (left) has more than doubled the value of his portfolio as an investor. According to an agreement with his father Michael Schlein, he will not withdraw any money from his account until he is 25 years old. “You have to be ready to lose everything.”


Photo:

Amy Lombard for the Wall Street Journal

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