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How can I teach my children about trading?

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

I’ve searched the web for a way to help teach my kids about the stock exchange. I have found a lot of information, but nothing relating to the South African stock market. Is there a place where they can subscribe and do demo trades so they can learn how to play the stock market? They are 15 and 16 years old.

Herman Klopper - Futurum Financial Group

It’s reasonably easy to find a platform from which to start trading on the JSE, but to find the one that will best suit the needs of the individual can be a little more tricky. It’s always nice to see kids take an interest in the financial environment though. I believe many of them have a misconception about trading stocks or investing, as most of us did when we were kids. The lessons learned cannot be translated into a monetary value. Practical experience will give them a lot more insight. 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 (which fund managers usually use), and it’s South African-based. The platform will give you a certain amount of ‘money’, and you will have access to all the stocks you can think of. 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 ‘Monopoly’ 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’ (MACD) trading indicator used to reveal changes in the strength, direction, momentum, and duration of a trend in a stock’s price) and the Relative Strength Index (RSI), which measures the speed and change of price movements, as well as line formations and so on. This gets interesting once you have some background or knowledge on 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 – and the more mistakes they make the better. They might find it boring to read the news, but if there is a reward for them 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 for them managed by an accredited fund manager.

Do you have any questions you would like answered by registered financial planners?

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