On Tuesday, we spoke of how you can introduce your teenagers to the concept of investing and the reasons you must.
Data shows more teenagers in India are looking for ways to experience the world of investing. Per SEBI, a minor can have a savings and Demat account but cannot buy and sell stocks using a trading account.
However, as a guardian, you can buy and sell stocks and mutual funds for your teen. Let’s look at the kind of investments your teens can invest in a little later in this blog.
But, let’s see why investing as early as possible is imperative.
Benefits Of Investing As a Teen
- Enjoy the benefits of compounding
- You become financially disciplined
- You improve your risk appetite
- You create wealth for yourself
- You save on taxes
How much would a Teen need to start investing?
You don’t need a crore or lakhs to start investing. All you need is Rs. 500 to 1000 to start investing. Your teens can add to it later when they earn and save a little more.
Now, let’s see what your teens can invest in
Stocks: Your teen can own a piece of a publicly-traded corporation through stocks or IPOs. Investing in an IPO allows investors to earn good returns when the company lists on the stock market. Investing in stocks means your teen becomes the shareholder and part-owner of the company. Investors make money when the value of the stock increases, and through dividends, companies pay shareholders. Of course, you would need to operate the Demat account on your teens’ behalf.
Consider investing in one or two companies you know. Your teen needs to practice buying and selling before. So, try setting up a virtual trading account to help your teen understand how investing works before using actual money to invest.
Mutul Funds: If you want your teen to understand how to become financially disciplined, then invest in a mutual fund. A mutual fund brings together money from different investors to invest in a diversified portfolio of stocks, bonds, or other assets. The collective holdings the fund owns are known as its portfolio.
You can start investing with as little as Rs. 500 a month. A mutual fund will let your teen understand what to expect during a bull or bear run. As the mutual fund value increases, your investment value does too.
Exchange Traded Funds: An ETF is like a mutual fund; however, you can add several securities to your child’s portfolio via a single investment. But unlike a mutual fund, an ETF trades throughout the day like a stock. To understand how investing works, you can help your teens invest in an index fund. An index fund is an index-based ETF that mimics an index like the NSE, BSE, or other stock exchanges. An index fund is also the easiest way to diversify your portfolio.
Government Bonds: A Government Bond is another instrument your teen can invest in to earn fixed interest on a lump sum amount. The principal is re-paid after the bond matures. The government issues these bonds when they want to finance its operations.
Bank Fixed Deposit: Another fixed-income asset popular in India is the Fixed Deposit. India has one of the highest deposit rates in the world. Your teen can invest in a fixed deposit for a specific goal. After the deposit matures, your teens can use the principal plus compound interest to fulfill their desires.
Post Office Fixed Deposit: Like the banks’ fixed deposits, you can help your teenager invest in a deposit scheme the Indian Postal Services offer. Such fixed deposits can help your teen earn guaranteed returns on the lump sum deposited with the post for a set period.
We hope this list helps your teens start saving and investing for the future. It is vital that your children learn to invest now to create substantial wealth.