There are numerous reasons why teenagers should begin investing early. Early investing offers the opportunity to understand and explore various investment options while allowing for adjustments in strategies based on lessons learned from successes and failures without the pressure of significant financial burdens.
Example: If you start investing at the age of 22 in the amount of $ 100 per month with a 10% return per year, then you will have $710,810.83 when you reach 65 years old. However, if you start investing at the age of 15, you will have $1,396,690.23or almost double the amount, demonstrating the power of compounding interest.
Before starting to invest in the stock market, teens might be curious about the following questions:
I. What is the minimum age required to start trading?
In Cambodia, individuals who are 15 years old or older, with a national identification 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 skills to trade and the ability to handle investment risks. Starting early and practicing consistently can prevent financial stress in the future. As the proverb goes, “The best time to plant a tree was 20 years ago; the second-best time is now”.
III. Are there any qualifications required to trade?
There is no formal qualification process to trade securities on the Cambodia Securities Exchange (CSX). However, having a foundational understanding of financial investments, securities trading and risk management is crucial for making informed investment decisions. By participating in workshops and training sessions offered by the Securities and Exchange Regulator of Cambodia (SERC), you will enhance knowledge related to the securities sector.
IV. What is the minimum capital needed to start trading?
There is no minimum capital requirement for trading; you can buy as little as one share. You only need enough money to cover the stock’s price and the broker’s commission fee, which ranges from 0.45% to 0.47%. The commission fee applies only when an order is executed. The minimum unit of order for stock and bond are 1 share or 1 unit of bond.
Example: An investor purchases equities or share of Mengly J. Quach Education at a price of 2.050 riels on October 28, 2024, so in order to be able to purchases a share of the above listed company, investors shall have at least 2.145 riel.
V. Why teens should start investing in the stock market
The primary advantage of stock market is the creation of a passive source of income for investors. Passive income refers to a sustainable income earned from work or other investments without labour, allowing investors to focus on other daily activities while earning extra passive income.
Many teens tend to believe a lack of capital is the main obstacle to start investing but that is not the case when it comes to the stock market. In addition, young individuals are often quick to embrace new concepts and willing to take risks. Instead of saving, they should leverage this adaptability to explore investment opportunities that can yield high returns.
Teens have plenty of time to learn from past investment mistakes, which allows them to set the next investment strategy correctly and seek out high profit opportunities.
One of the most important things that they should remember is the importance of diversifying their investments to maximise returns and hedge risk. To reduce risk, investors should not invest all their money in a single stock, but rather in companies from different sectors or with different market capitalisation as this brings different degrees of risk and return. When one stock price falls, the other stock may rise. In this sense, investors can still make a profit and avoid falling into a situation which is difficult to recover from.
One other advantage that may appeal to teens is how the stock market offers significant advantages over other asset classes due to its structured framework that allows investors to trade on a regular basis. In this sense, investors in the stock market who bought stocks or bonds can sell at any time in the market to get cash back when they need to.
VI. Essential steps teens must understand before starting to invest
To build a foundational knowledge of investing in the stock market, they should try to keep track of information related to the securities sector and seek investment advice from a broker or investment advisory firm licensed by the SERC.
Understanding their investment goals in advance is crucial. Consider what you plan to do with the profits generated from your investments. Establishing clear goals will help you formulate an appropriate investment strategy.
With so many options available, investors should do research on potential investments, as well as the financial products that they are intending to invest in, to ensure that those investments align with their goals, risk tolerance and timeline to achieve a favourable return.
To start investing in the stock market, they need to have an investor ID and trading account with a securities company licensed by the SERC or open an online trading account via the link https://id.serc.gov.kh/kh.
Once that is done, its time for them to implement their investment plan. Successful investing requires a long-term perspective, discipline and patience.
***Disclaimer: This article has been compiled solely for informative and educational purposes. It is not intended to offer any recommendations or as investment advice. The SERC and Phnom Penh Post are not liable for any losses or damages caused by using it in such a way.