These teens are having fun in today’s stock market. They share the secrets to their success

“This was a different account that we hadn’t been tracking as much and when we eventually checked this account, we saw how much we were up. I remember my mom called me, she’s like ‘Should we get out, should we get out?’ I said, “No, no, no, let Tesla ride a little bit,” the 14-year old Atlanta, Georgia-based Jones recalls in an interview with MarketWatch.

In the end, he and his mom netted $78,000 off a single options contract. “People focus on the money, but it was really because it was one contract. That was what was amazing to us,” says his mother, Janel.

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He’s one of many kid investors out there, who seem knowledgeable beyond their years. According to a Deutsche Bank survey, a new wave of younger traders has grown during the pandemic, though the under-18 crowd, sprinkled across social media, is less easy to track. As for the rules, minors in the U.S. can only trade or invest via a custodial account supervised by a parent or guardian.

Jones got his own trading bug at nine years old from a YouTube video, and convinced his mom to let him buy a few shares of Amazon AMZN, -0.01%, which he thought would be “a good long-term investment because everyone” uses the online retailer. The eighth-grader funded those early trades with earnings from a book he wrote about bullying in youth sports, “The Win Within.”

He then moved to options, helped by his mom, who used football analogies to explain, and learned alongside him.

Jones bases his stock picks off “where the world is going,” which has led them to companies like electronic-signature group DocuSign DOCU, -1.62%, and streaming digital player Roku ROKU, -3.84%, as well as pharmaceutical and artificial intelligence spaces — chip group Nvidia NVDA, -3.54% is currently on his radar for its “innovation specifically, its smart cities,” and “solid numbers.”

Jones, whose first love is football, hopes to one day combine his passions via a hedge fund to help professional athletes manage their money. The honor-roll student and star athlete offers how-to investing courses through his company Return on Investment LLC.

Weekend at Buffett’s

Not many teens would make it a point to squeeze legendary investor Warren Buffett into their weekends, but then Srivatsan Prakash is no ordinary 17-year old.

Described as an “aspiring fund manager” on his Twitter account, Prakash told MarketWatch that the investing world drew him in at 13. He would pore over autobiographies of Berkshire Hathaway’s BRK.A, +2.09% chairman Buffett and Microsoft’s MSFT, -0.34% co-founder Bill Gates, and “Rich Dad, Poor Dad” by entrepreneur Robert Kiyosaki to learn about their moneymaking strategies.

The Toronto, Ontario-based teen was also glued to Berkshire Hathaway’s recent annual letter to shareholders, and highlighted some big takeaways: “Never bet against America” and everyone makes mistakes.

Prakash also has an entrepreneurial spirit, funding early trades from a graphic design business via Instagram. He saw success with his first stock, coffee giant Starbucks SBUX, +0.88%, which he bought in mid-2018 for $53 a share then sold when it hit $87 in mid-2019.

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That led to an early mistake, as he got too confident after that trade and began shorting some stocks he thought were overvalued, only to end up losing part of his Starbucks profit as the market moved against him, but he’s grateful for the early fail.

“That was sort of my first lesson in bubbles and you know, not shorting irrationally,” he says, and it marked the point he started using stop losses, which help traders limit trading gains or losses.

Prakash says he’s currently in the middle of what he calls his best trade, RealNetworks RNWK, +9.66%, known for early streaming media technology and now facial recognition software. Those shares have been rising since he bought it last year. It falls in a category that he likes — smaller companies ignored by Wall Street.

Growth potential for micro and small-caps often gets overlooked, which is why the research can be intense, but “the rewards are better,” he says, noting that Buffett has also doled out that advice.

“I just find analyzing numbers, and intellectual pursuits as a whole, interesting and exciting,” says the teen, who dabbles in stocks, options, currencies, bonds, and says his school grades are “decent.”

He currently hosts his own podcast, Market Champions, where he has interviewed famed investor Jim Rogers, among others. He hopes to one day have his own hedge fund and retire at around 35. His advice to aspiring investors? “Don’t go into things you don’t understand, and keep reading the great investors, as it is “a long, long journey.”

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A couple of TikTokers

Teamed up with her 17-year old boyfriend Adi Adara, 19-year old Parii Bafna is ready to make her mark on a new generation of investors. The young Minneapolis-based couple have over 800,000 followers and 18.1 million liked videos on their personal-finance themed TikTok account.

Adara and Bafna both got hooked on investing years earlier through simulation trading games on MarketWatch’s website. Adara says he “became obsessed and probably spent all my class time trying to choose stocks.”

The pair started to step up their investing roughly a year-and-a-half ago; like many, finding they had more time due to the pandemic. Bafna recently dropped out of her freshman year of college, after finding it too hard to juggle their content creation business with classes. Affiliate marketing on TikTok is one income stream for them.

Noting that both sets of parents have been supportive of them, Bafna says she plans to return at some point, but says she’s now “looking at better opportunities than I would have gotten in college.”

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The investment frenzy around videogames retailer GameStop GME, +34.10% and other shorted stocks earlier this year rang some familiar bells for the pair, who cut their teeth on pennystocks, getting stressed out “trying to ride all these waves,” recalls Adara. Other poor trades include investing in Marathon Oil MRO, -3.43% just before the virus hit.

The young investors now make it a point to scrutinize long-term cash flow of companies, and apply lessons learned from Buffett about interpreting financial statements. “Does the company have durable competitive advantage?” is a huge one for them.

Progenity PROG, +0.25%, which works with big companies to offer employee maternity and paternity benefits, is one of their top picks right now. Exchange-traded funds like ARK Innovation ETF  ARKK, -3.02% and SPDR S&P 500 ETF SPY, +0.53%, which tracks the U.S. stock index, have also been paying off in a rising market. They have seen positive returns on investments in tech giants Apple AAPL, -3.01% and Microsoft MSFT, -0.34%, while e-commerce group Shopify SHOP, -0.53%, an “impulsive” buy from last year, has just started to turn a profit, says Bafna.

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For the next five years, they hope to “fill the void” of investing information available to a younger generation, especially in the wake of GameStop. “I think we’re both going toward that space to teach Gen Z because, first of all, school isn’t doing a good job. And secondly, there is a ton of information on the internet that just needs to be curated and fed out in a ‘fast simple manner,’” says Bafna.

As for advice to young trading enthusiasts?

“Just start, even if it’s the smallest, smallest, smallest amount, just familiarize yourself and get used to it because it’s not going to go away soon,” says Bafna. Adds Adara: “Starting early gives you that confidence boost…the advice that I would give is start with something you know.”