States impose a minimum age for opening brokerage accounts. This age is 18 in a handful of states, and 21 in most states. Virtually every individual investor buys and sells stocks through a broker; hence, the minimum age for opening an account acts as a restriction to investing in stocks. Anyone over the age of 21 can invest in stocks, though many financial planners recommend that older individuals minimize exposure to the stock market.
States do not allow children to buy or sell stocks. In California, the District of Columbia, Kentucky, Louisiana, Maine, Michigan, Nevada, New Jersey, South Dakota, Oklahoma and Virginia, children legally become adults for the purpose of trading securities like stock at age 18. All other states require individuals to be at least 21 to buy and sell stock.
Most brokers offer custodial accounts for minors who want to invest, or parents who want to create a portfolio in their child's name. Custodial accounts hold shares of stock in a minor's name and the minor's name is on the account; however, a parent or legal guardian administers the account. A minor can contribute money to the account, follow her investments and make recommendations on trades, but the parent or legal guardian must be the person placing the orders. Once the minor reaches age of majority, she can take over the administration of the account, and it legally passes to her.
Anyone over 21 can invest in stocks, even the oldest person in the country. However, most financial planners advise against investing in the stock market after a certain age, and strongly advise against investing any retirement funds in the stock market close to or after retirement. The stock market goes through notorious booms and busts; if you can keep money in for a long time, you can hopefully recuperate any loss and take advantage of the booms. As a person ages, her investment horizon shortens.
Over time, the stock market offers the highest return for an individual's money, averaging 10 percent a year over the last 100 years. The longer a person can leave money in the stock market, the higher her likely returns. As a result, CNN Money, Bank Rate and Business Week recommend that younger people take more risk by putting some of their investments in the stock market, while older investors limit or avoid contact with the stock market and invest in safer areas, such as bonds or mutual funds.