Teach kids about trading

LOSSES: IT’S ALL ABOUT LESSONS LEARNED AND KNOWLEDGE EARNED

I want my teenagers to learn the stock exchange ropes – where do I start?

I will discuss two separate platforms that you might wish to consider.

EasyEquities Trading Account (demo)

This is a user-friendly platform that’s ideal for young kids.

It’s easy to understand and use. There are no complicated data sets or graphs and it’s local. The platform will give you a certain amount of “money”, and you will have access to all the stocks.

There is also the option to buy international stocks in dollars, which can make things a bit more exciting and give their demo portfolio better diversification.

They will receive additional “money” to buy the international stocks. This allows them to buy into products they might use, like Apple, Samsung, Sony or Warren Buffet’s companies.

This account won’t allow you to trade on margin, which in effect means that for every rand/dollar invested, the move will be equal to the movement of the stock purchased.

IG Trading Platform (demo)

This platform might suit your kids better at a later stage, but they can still open an account and give it a try. The account is a bit more intermediate and allows you to buy derivatives and short stocks (betting against a stock).

It also allows you to use technical analysis features such as the moving average convergence/ divergence trading indicator and the Relative Strength Index. This gets interesting once you have some knowledge of trading. The account will also give you Monopoly money, so don’t worry.

Margin trading is allowed on this platform, which means losses may exceed capital invested.

Since this is a demo account, it can be a great way to learn about margin trading, experiment with basic technical analysis, test out futures and options, and get used to managing risk.

The account also gives you the option of trading in stocks that are not on the JSE. IG Trading might be too advanced for those who have no prior experience, but it is a great learning platform – and more exciting since volatility, or fluctuations, in funds will be higher because of the margin trading.

Spark their competitive spirit

I recommend that you open an EasyEquities demo account for each of your kids, and let them compete against each other on a weekly basis.

Get them to read up on things and explain to you why they picked the stocks they chose. They should know a bit about the big events in the economy, both locally and internationally, and how they might affect their portfolio.

Remember that the aim is to get them to discover how things work. The more mistakes they make the better. They might find it boring to read the news, but if there is a reward in it, they might give it a shot for longer than a week.

Once they become more comfortable, they could each put in a few hundred bucks and pick some shares to actually buy so they get to experience the effect emotion has on choices when you have actual skin in the game.

Once again, a few rand lost here or there will be nothing compared to the lessons learned and knowledge earned. Talk to a certified financial planner or investment expert if you would like to open actual investment accounts.