This was in 2022. Today, he is sitting smug with a Rs.75,000 portfolio. “Earlier, I was applying fundamental analysis to pick stocks. Now I’m learning technical analysis,” says the seemingly placid 18-year-old, who’s raring to have his own trading account soon, even as he pursues finance at Narsee Monjee College of Commerce & Economics, Mumbai.
His father, Delhi-based Ashish, can’t stop beaming. “My father had nudged me into stock investing when I was a teenager, and I have done the same for my son,” says the 47-year-old, who offered his trading account to Akshaj so that he could start experimenting.
Is it too early to start?
While the raging Indian markets have pulled in many an unlikely investor in the past few years, pushing youngsters on the threshold of adulthood into this ‘risky’ avenue could be seen as extreme by many. Yet, experts disagree.“Early exposure to equity can demystify investing and help teens see it as an approachable, systematic process rather than a complex, blackhole scenario,” says Abhijit Bhave, MD & CEO, Equirus Wealth. “While 16 years can be a good starting age because teens are beginning to understand real-world financial concepts, at 17, they can definitely grasp basic concepts like risk, return and long-term growth potential of investments,” he adds.
“Some teens are already exposed to these concepts through their families or friend circles, but this age is appropriate for giving them an orientation, assuming they have an interest,” agrees Dinesh Rohira, CEO & Founder, 5nance.com. “The orientation should start at 15-16 years, and from 17-19 years they should be exposed and trained because some of them may even want to make a career out of it,” he adds.
There is no dearth of interest for Japneet Singh Bhalla, the 17-year-old who started with an IPO last year and now invests in stocks, ETFs and mutual funds—with his parents’ account and most of their money. Not only is he uncannily familiar with market concepts and jargon but, more surprisingly, Bhalla is a self-starter. “My parents have no knowledge about the markets. I got interested when my teacher told us about an IPO last year,” says the finance student studying in Navi Mumbai. He now assiduously researches every market instrument before investing in it, with a strong logic to back his choice.
This is an approach Uma Shashikant advocates fervently. “Instead of the traditional approach of starting with concepts and basics, allow them to dip their toes themselves. Let them pick stocks and funds and see how their views play out. Create a safe space for them to talk about their investments without being judged or criticised. Let it be their own story of discovery,” says the Chairperson of Centre for Investment Education and Learning.
The approach can be subjective depending on the parents, but the consensus is clear. It’s a good idea for parents to prod their teens towards equity investing, be it stocks or mutual funds. It not only opens up a seemingly arcane investing avenue, but also prepares them for more focused investing when they start earning, and gives them a long horizon for wealth creation.
“Compounding in equities takes time, and time is compounding’s best friend. The earlier the parents teach this to their teens and the earlier they start investing, the sooner they will be able to grasp the markets and create tremendous wealth in the future,” says Rushabh Desai, Founder, Rupee with Rushabh Investment Services.
To give the keen teens a headstart, ET Wealth has decided to provide a rudimentary, five-step roadmap to their parents on this Children’s Day.
While most steps merge or overlap with one another, the purpose is to set them on the right track through guidance and self experimentation.
1.Introduce basic equity concepts at 15-16 years
While curious teens will find a way to learn about the markets, they may not always tap the right avenues. This is where the parents can step in. “Since it’s not taught in schools, it’s important to teach them the basics and direct them to programs that can help them understand the fundamentals,” says Mrin Agarwal, Founder, Finsafe India. “However, the biggest problem is that parents themselves don’t have knowledge about the markets,” she adds.
If the parents are not confident, they can direct them to financial planners, reading material and online courses. If, however, parents are investing in the markets themselves, 15-16-year-olds can be weaved into the conversations about equity portfolios and investing basics.
This is how Noida-based Aarav Jain,15, who is very keen on equity investing, has started. “Since we have been investing in mutual funds through SIPs, we have tried to introduce him to the subject through family discussions, talks with our financial adviser and picking a finance-related subject in school. Now, we are about to start a mutual fund SIP using his pocket money and other cash gifts in his name,” says his mother, Sonia. Rohira endorses this: “If parents are involved in investing, they should share their life experiences and also introduce them to investing theories and instruments.”
Parents can start by explaining basic terms like equity, stocks, mutual funds,risk and return, bear and bull markets, volatility, as well as concepts like diversification, compounding, goal-setting, and long-term investing. “Reinforce how through compounding, reinvested earnings lead to exponential growth over the long term, a core advantage of early investing. Explain how higher potential returns come with higher risk. Teens should understand this trade-off and know that not every investment return is guaranteed,” says Bhave.
Equity traps youngsters should avoid
Here are some pitfalls that can not only lead to losses, but also put the teens off the stock markets.
Making quick money
Most teens can do with extra money, given their spending needs, and stock market is often seen as a source of quick money. It’s unlikely that you will make money through random trading. Even if you get lucky once, it won’t last long. Market investing involves patience, research and hard work.
Gambling or speculating
If you are investing in the market for thrill, or because your friends are doing it, or it’s the latest fad, or you have information on a stock’s appreciation, don’t do it. Any investing without research and analysis is gambling and will lead to losses.
Free tips by friends, ‘insiders’
If your friend has heard of this ‘hot, insider tip’, or you’ve got a tip off a WhatsApp group, ignore immediately. Unless you know the reason why you want to put the money in a specific stock, avoid it. Conduct your own research before investing.
Social media influencers
Though YouTube is a favourite among teens to know about the markets, remember that a large number of followers or subscribers does not translate into investing expertise. Stick to online or offline courses from recognised institutes and professionals in the field, or read newpapers and books.
Day/derivative trading
This is the riskiest option even for older, experienced investors. As per a Sebi study, 93% individual traders lost money in equity F&Os between 2021-22 and 2023-24. Do not attempt it, at least at this early stage.
Starting with a large sum
It’s best to start with mutual fund SIPs or ETF investing, but if you are interested in stocks and IPOs, start with small sums ranging from Rs.10,000-50,000. Avoid penny stocks, small caps, sectoral funds and derivatives, but if you want to experiment, use a small amount.
2.Tell them about risks & traps
Even before the child starts to research and explore in greater depth, explain to him the pitfalls of a flawed attitude towards equity investing, the dangers of wrong advice, of getting emotional about investing, and other market-related risks.
Quick-rich plans: Dissuade the child from equity investing if all he wants is quick money. “A lot of youngsters want to make money fast and not listen to their parents,”says Agarwal. This is why they want to indulge in day trading or derivative trading. Bhalla may be an exception. “I don’t want to take the risk of options trading even though I’m learning it, and want to invest for the long term. I’m investing in the ETFs because I want money in two years for my studies and this is a safe option,”he says.
It’s important that the teens be explained the basics of how markets work. The stock market is no magic box, where tips and trades yield gargantuan sums in a jiffy. On the contrary, the longer they stay invested in the market, the better their chances of earning high returns. “They should understand that it¡¦s hardearned money and requires work. It is not a gamble,” says Rohira.
Wrong source of advice: Another big gaffe is looking for ‘hot tips’ from friends, ‘insiders’, unverified sources, WhatsApp groups, or social media influencers. “The kids hear about equity investing from all types of sources and feel it’s very easy to make money from the markets. Social media influencers are the biggest risk,”says Agarwal. This may also be the surest way to fall victim to scams and lose all the money. Bhalla, however, is very cautious. “I always research the instruments I invest in and know the reason why I’m investing in it. Even for the Tata Technologies IPO last year, I had analysed the company before going for it,”he says.
Market risks & hype: The teens need to be told that the markets are risky and they can lose all their capital, especially if they follow the herd or fads. They should be informed about the higher risk involved in small caps and penny stocks, sectoral themes, futures & options trading, and stocks with low volumes. “Discourage investments based purely on trends without proper research, reinforcing that sound investing requires diligence. Also explain that short-term price changes are routine and don’t always reflect fundamental issues. They should avoid getting emotional about daily fluctuations,”says Bhave.
3.Evolved research & mock portfolios
A teenager between 17 and 19 years should move from basics to a deeper analysis and evaluation of the markets and companies. Unless the parents have sufficient knowledge or depth of experience from years of successful personal investing, it’s best to direct them to other avenues of research.
These can include online and offline courses from recognised institutions and platforms like NISM, NCFM, BSE Institute, etc.; books and newspapers; workshops and webinars from professionals and industry experts like Rachana Ranade and Ankur Warikoo; and virtual or paper trading platforms (see box). There is a wide range of courses available in terms of duration and complexity, starting at beginner or basic levels and moving on to intermediate and advanced levels. “I learnt the basics of investing and markets from YouTube, then took an online course by Trading Ideas, and am planning a five-course certification program from NCFM next year,” says Bhalla.
Akshaj, meanwhile, learnt market fundamentals from Edutri India’s free coaching sessions after joining a WhatsApp equity investing community recommended by one of his tutors. “I’m now learning technical analysis as part of a college project and am analysing balance sheets,” says the teen who wants to focus as much on learning as actual investment.
“The teens need to know the basics of economics and economies, company fundamentals like revenue, profit, and key products or services that generate earnings, key sectors, track performance of stocks, and understand how economic policies and global trends impact the markets,” says Bhave, who also recommends books like Rich Dad Poor Dad by Robert Kiyosaki, and The Psychology of Money and Same As Ever by Morgan Housel.
“The most important thing is that the child should know why he is doing what he is doing, and not trading blindly without any knowledge,” says Rohira. “If he doesn’t know why he is investing, he will not know whether he will get the desired returns. If he doesn’t get good returns, at least he will know why,” he adds. Shashikant agrees. “Teens should be encouraged to form an investment thesis about why they are buying a stock. If they pick up the basics of balance sheet analysis, it will help understand how a business is using capital and whether it is profitable. If they know that selecting stocks and allocating capital is not a gamble and that diversification is actually a strategy, it will help,” she says.
After theoretical knowledge, they can start paper trading, where simulators help them trade with virtual money. “They can go for virtual trading apps and platforms like Neostox or Stock Trainer and gain some confidence. Besides, professional academies give test cases to explore. If nothing else, parents can build a trading chart for them and once they understand the nuances, they can start tracking the companies and do dummy trading,” says Rohira.
4.Open demat & trading accounts
When the child is ready to start trading, he will need demat and trading accounts. If he is below 18 years, he can have a demat account, but cannot operate it. He can’t have a trading account, but his parent or guardian can open it on his behalf. If the child wants to start trading before 18, parents can also open their own accounts and create portfolios for the children.
The child should also be well-versed in the operation of these accounts, KYC processes, and banking operations. To open these accounts, the parents need to find a stockbroker registered with CDSL or NSDL. Most brokerages offer comprehensive 2-in-1 or 3-in-1 accounts that combine bank, demat and trading accounts. The account opening requires filling up a form with child’s details, submitting documents including the child’s birth certificate, PAN and Aadhaar for both the child and parent, and bank account details of the parent. KYC for both parent and child will also have to be done.
5.Give them a free hand, but monitor
Once the accounts are opened, the child can start trading. While it is important to give a free hand to the teenager, the parents need to monitor and preferably have certain guidelines in place. “It should be a guided investment to start with, at least for a few months, with defined minimum and maximum investment, average time frame of investment, average return expectations, etc.,” says Rohira.
The amount to be given to the child can vary for parents, but it should ideally be less than Rs.50,000 and can be given as a lump sum or in instalments, if the child wants to invest in mutual funds via SIPs. Bhave feels the initial investment should be Rs.10,000-25,000 as “this keeps the risk of loss low and also teaches real-life lessons to the child”.
“Allocate an amount you won’t regret losing. Tell them that this is the capital they have for investing in stocks and funds. They have to make decisions with just this money, but you can allocate capital in tranches, if you so wish,” says Shashikant.
Ideally, the child can start with mutual funds because these can help build confidence, while the rise and fall in stocks can shake their confidence, says Rohira. However, if they want to start with stocks, allow them to do so, even if they make mistakes.
An important part of this exercise is periodic reviews and handholding. You can schedule a review every fortnight or month and talk about his decisions and the reasons for the same. “If you do it for a year, it will go a long way in helping the child understand the nuances of investing, especially after the theory and dummy trading, says Rohira.
“Lastly, enable conversations about their decisions. Listen without interruption or judgement. Encourage discussion, allowing them to lead,” says Shashikant.
