Why teenagers should start investing in stocks

Posted at 08/12/14 8:10 AM

MANILA, Philippines – Investing in the stock market at a young age will boost the chances of young investors to make money because of their long investment horizon, an expert said.

Financial analyst Gavin Lee believes that investing early will allow investors to understand better the trends in the stock market.

“If they start investing early, they stand a better chance of increasing their wealth and riding the ups and downs of the market,” he said on ANC’s “On The Money.”

Lee, however, noted that teenagers getting into the stock market should first learn about valuation and how it affects profitability.

He said that studying valuation will give newbie investors an edge over those who rely on “hot tips” for their stock market decisions.

“I think it’s important, especially for the young ones, for them to understand even a basic model like this so they don’t get dragged into the ‘hot tips.’ It’s important for newbies to understand that the market has a certain framework to it. It you understand that framework, you don’t have to subject yourself to all the rumors and ‘chismis,’” he said.

Lee recently gave a lecture to three students of UP Diliman on valuation, teaching them how to use the right assumptions; tempering expectations to get fair value; and the importance of cash and taking risks.

One student investor who took Lee’s mini-class, Raul Arellano, said that now is the time for teenagers to invest because of the positive outlook of the country’s economy.

“As they say, the Philippines in the next 15 to 20 years will be a booming economy. So by that time, if you didn’t start investing, you’ll be left behind by all the people who started earlier,” he said.

Financial advisor Salve Duplito, meanwhile, said being a teenager is the perfect time to start learning about valuation.

“This should be included in the general curriculum. Financial smarts is just as important as history or natural science,” she said.