A teen’s guide to getting started investing in the stock market

There are many reasons why teenagers should start investing early. Early investing provides an opportunity to understand and explore different investment options, while allowing you to adjust strategies based on lessons learned from successes and failures, without the pressure of significant financial outlays.

Example: If you start investing at age 22 at the rate of $100 a month with a 10% annual return, you will have $710,810.83 by the time you reach 65. However, if you start investing at age 15, you’ll have $1,396,690.23, or nearly double that, showing the power of compounding interest.

Before starting to invest in the stock market, teenagers may be interested in the following questions:

I. What is the minimum age required to start trading?

In Cambodia, individuals over the age of 15 who hold a national ID card (for Cambodian citizens) or a passport (for foreigners) can apply for investor identification and open a trading account.

II. When should I start trading?

You can start investing when you have sufficient financial resources, knowledge and trading skills and the ability to manage investment risks. An early start and consistent practice can prevent future financial stress. As the saying goes, “the best time to plant a tree was 20 years ago; the second best time is now.’

III. Do you need any qualifications to trade?

There is no formal qualification process to trade securities on the Cambodia Stock Exchange (CSX). However, a fundamental understanding of financial investments, securities trading and risk management is critical to making sound investment decisions. By participating in seminars and training sessions offered by the Securities and Exchange Regulator of Cambodia (SERC), you will improve your knowledge related to the securities sector.

IV. What is the minimum capital required to start trading?

There are no minimum capital requirements for trading; you can only buy one share. You only need enough money to cover the share price and the broker’s commission, which ranges from 0.45% to 0.47%. The commission is charged only when the order is executed. The minimum order unit for shares and bonds is 1 share or 1 bond unit.

example: An investor buys shares or a share of Mengly J. Quach Education at a price of 2.050 riyals on October 28, 2024, so to be able to buy a share of the above company, investors must have at least 2.145 riyals.

V. Why teenagers should start investing in the stock market

The main advantage of the stock market is the creation of a passive source of income for investors. Passive income refers to steady income from a job or other investment without work, allowing investors to focus on other day-to-day activities while generating additional passive income.

Many teenagers tend to think that lack of capital is the main obstacle to starting investing, but this is not the case when it comes to the stock market. In addition, young people are often receptive to new concepts and willing to take risks. Instead of saving, they should use this adaptability to explore investment opportunities that can bring high returns.

Teenagers have enough time to learn from past investment mistakes, which allows them to correctly determine the next investment strategy and look for opportunities for high returns.

One of the most important things they should remember is the importance of diversifying their investments to maximize returns and hedge risk. To reduce risk, investors should not invest all their money in one stock, but in companies from different sectors or with different market capitalizations, as this brings different degrees of risk and return. When the price of one stock falls, another stock may rise. In this sense, investors can still make a profit and not end up in a difficult-to-exit situation.

Another benefit that teenagers may enjoy is that the stock market offers significant advantages over other asset classes due to its structured structure, which allows investors to trade on a regular basis. In this sense, investors in the stock market who bought stocks or bonds can sell them at any time in the market to get money back when they need it.

VI. Basic steps teenagers need to understand before starting to invest

To acquire fundamental knowledge about investing in the stock market, they should try to follow information related to the securities sector and seek investment advice from a broker or an investment consulting firm licensed by SERC.

An early understanding of their investment goals is important. Think about what you plan to do with the return on your investment. Setting clear goals will help you formulate an appropriate investment strategy.

With so many options available, investors should do their research on potential investments, as well as the financial products they intend to invest in, to ensure that these investments match their goals, risk tolerance and time frame to achieve favorable returns.

To start investing in the stock market, they must have an investor ID and a trading account with a SERC-licensed securities company or open an online trading account at the link https://id.serc.gov.kh/kh.

Once this is done, it will be time for them to implement their investment plan. Successful investing requires a long-term perspective, discipline and patience.

***Disclaimer: This article has been compiled for informational and educational purposes only. It is not intended to provide any investment recommendations or advice. SERC and Phnom Penh Post shall not be liable for any loss or damage caused by such use.