Can I invest in Stocks Before 18? How to invest as a minor?

More and more Indians are jumping into stock market investing these days, fuelled by online platforms like Zerodha, Groww, etc. The number of retail investors grew by an astonishing 14.2 million in FY21. Young Indians have been the pallbearers of this growth story and this has inspired teenagers in India to learn about investing in stocks.

So, can you invest as a minor?

Yes, you can! A minor (below 18 years of age) can invest in the Indian stock market. However, the process is slightly different for minors, than it is for adult Indians, and you will have to involve your parents or legal guardians in the process. Let’s see how you can invest in stocks as a minor in India.

In this blog post, I will be covering all aspects of investing as a minor in India. We will have a look at the minimum age limit to invest in the share market, how you can invest as a minor, or if you are a parent reading this post, we will see how you can invest in stocks for your child, best investment options for minors in India and a lot more.

Use the table of contents below if you wish to read about a particular point. Although I would recommend you to read the whole post to know everything in detail. There’s a list of FAQs on investing as a minor at the end of the post, you can refer to that as well.

What Is The Minimum Age Limit To Invest In Share Market?

Contrary to popular belief, there is no minimum age limit to invest in the Indian share market.

When investing is concerned, as such there are no age restrictions.

However, if you are a minor (below the age of 18) your parents or legal guardians will operate the trading account, Demat account, and bank account for you.

As a minor, you can invest in stocks, apply for IPO, invest in ETFs, and mutual funds, however, you are not allowed to do intraday trading using a minor trading account.

Don’t worry! I’ll cover all these aspects in simple language in the coming sections.

How to invest in stocks before 18? Investing as a Minor in India

So far we’ve seen that you can invest in stocks if you are under 18, and there is no minimum age to invest in the Indian stock markets. Now let’s have a look at how to invest as a minor.

The Indian Majority Act, 1875 defines a minor as someone who has not attained 18 years of age.

To invest in the stock market one needs to have a bank account, a Demat account, and a trading account.

Demat and Trading Account Opening for a Minor

There are no age restrictions for opening a trading and a Demat account in India. And a minor can have both in his/her name.

If you are a minor who wants to invest in the stocks market, or if you are a parent or guardian willing to buy stocks for your child, you can do so by opening a Demat account and a trading account for your child. The Demat account and the trading account have to be opened in the name of the minor, but shall be operated by his/her parents or legal guardian.

A legal guardian is one who has been appointed by the Court as the guardian of the minor and has to prove his/her guardianship of the child.

Documents Required for Minor Account Opening

Different brokerage firms have different requirements for minor account opening, but by and large, to open a trading account and a Demat account for a minor, you will be requiring the following documents:

• PAN card of the minor as well as guardian,
• KYC details of both the minor and guardian,
• Date of Birth proof of the minor,
• Address proof in the name of the child,
• Bank account details (cancelled cheque or bank statement of the minor), etc.

You can check the details here for a minor Demat account opening with Zerodha.

Note that a minor cannot be a joint account holder in a Demat account. You’ll have to open a separate account in the name of the minor.

Most stockbrokers in India allow account opening for minors.

Can a Minor do Intraday Trading in India

No, you cannot do intraday trading in India if you are below 18 years of age. There are certain restrictions that apply to minor trading accounts. You can only invest in stocks (Equity Delivery Trades only) using a minor trading account. Any speculative trading, like intraday buying and selling, is not permitted.

Minor trading accounts are not allowed to deal in the Equity Intraday, Equity Derivatives trading (F&O), and Currency Derivatives segments.

What to do Once the Minor Becomes 18 Years Old?

Once a minor attains 18 years of age, that is, becomes a major, there are two options.

First, you can continue to use the minor trading and Demat account. For that, you will have to submit proof of attaining majority to your brokerage service provider, as soon as you are 18 years old. This way, the minor trading, and Demat account, will be converted into a major trading and Demat account, and all details of guardians will be deleted. The person will now be able to operate his/her own accounts. All restrictions on a minor trading account, like restrictions on intraday trading will also be removed.

Second, you can apply to close the minor Demat account and open a new account as a major. All your holdings from the minor account will be transferred to your new account.

This way you can continue to trade and invest in the share market, just like any other adult Indian, once you become 18 years old.

Conclusion

You can invest as a minor in India, but for that, you will have to involve your parents or Court-appointed guardians, until you attain 18 years of age.

You can invest in stocks under 18 by getting your parents to open a trading account and Demat account for you, and they will have to operate it, in your name, until you become 18 years old. Note that, a minor is only allowed to make investments (Equity Delivery Trades only), and is not allowed to do intraday trading and trading in F&O segments.

Equity Delivery Trades simply means that the stocks you buy are transferred to your Demat account, and you have to hold them for more than a day, like a week, a few weeks, months, or years.

You can refer to this document on minor Demat and trading account, from SEBI.

Can a Minor Invest in Mutual Funds in India?

A minor can invest in mutual funds in India with the help of his/her parents or legal guardians.

Just like in the case of stocks, here also your account has to be opened and operated by your guardian until you become 18 years old. The minor must have a separate account and will have to be a sole account holder, as joint holding is not permitted in the case of a minor’s Mutual Fund folio.

Once the minor becomes a major, proof of majority has to be submitted to change the status of the account from minor to major.

Where to Invest as a Minor? Best Investment Options for Minors in India

Stocks are no doubt one of the best asset classes available for investing one’s money.

If you are a minor or if you’re a parent reading this post, long-term investing in the stock market is one of the best options for your child’s future. This is because starting at a young age, with a long-term vision of 20 to 30 years or more, will give compounding a real chance to show its magic, provided you pick the right stocks. However, there are certain things to consider here, that I will cover in the next part.

If you think stock investing is a risky option for you, and you are not confident with investing in stocks, the first thing I will suggest you is to learn about investing in the stock market. However, there are some investment options for minors involving lesser risks that you can consider for the time being.

Some of the best investment options for minors other than the stock market are:

1. Mutual Funds
2. Public Provident Fund (PPF)
3. Insurance policies
4. Unit Linked Insurance Plans (ULIPs)
5. Fixed Deposits (FDs, although not recommended in present scenario of soaring inflation rates).

Should a Minor Invest in Stocks

The answer to this question will vary for different individuals depending on their family’s financial background, personal goals, and aspirations.

Starting early definitely has an advantage, considering how compounding works.

You must have heard about Warren Buffett, one of the most prominent investors of all time, and how he started investing at the age of 11, back in 1941. Now, he is among the wealthiest persons on this planet. And two things he did right, are starting early, and holding for a long time.

Investing as a minor gives you an opportunity to use compounding to your benefit. The more time you give, the more money you make.

But, there are a few things to consider here as well.

Not all stocks are going to turn manifolds over 20-30 years. Infact, some of the fairly prominent companies of today, may even be out of business 20 years down the line.

What one needs to take care of while investing in the stock market, is to learn investing. You yourself can make sound financial decisions and investment choices that suits your capability, your goals and aspirations, no one else can do that for you!

Starting your investment journey at an young age, is not enough to ensure that you will be successful in the stock market. You need to educate yourself in picking the right stocks, creating a balanced portfolio, and analyzing your portfolio from time to time.

If you are a guardian reading this post, I would congratulate you for being here, since you’ve already taken a step towards ensuring a better future for your child. Investing in the stock market is definitely a great option for the future of your kid. But at the same time make sure to educate your child in personal finance, investing and how money works.

Refer to the investing for students section of my blog, where I’ve covered numerous aspects of investing at an young age.

So, should you invest in stocks as a minor?

The answer depends on how willing you are to learn about investing! It is definitely a good idea, but has to be coupled with an ability to make informed financial decisions. Because stock market can be a “risky gamble” for those who don’t understand its nuances, and make investments based on news and tips from friends.

Frequently Asked Questions (FAQs) on Investing as a Minor in India