By Lorna Tan, Senior Correspondent

Older teenagers are now permitted to play the stock market, but experts advise budding investors to take a cautious approach before risking their cold, hard cash.

As of last month, investors aged between 18 and 21 can also open trading accounts. This is in line with changes in Singapore's civil law that now allow those 18 and above to enter into contracts.

Jumping on the bandwagon was OCBC Securities, which started offering trading account facilities from May 18 to investors who are at least 18 years of age.

Even before the recent change, it had been reaching out to young investors aged 18 to 29 via its Young Investor Pack (YIP) programme since March last year. It offers access to research reports and charting tools, among other investing services.

Young investors get to try their hand without actually risking cold, hard cash.

Said Mr Hui Yew Ping, managing director of OCBC Securities: 'The objective of the YIP programme is to educate young investors how to be responsible and prudent investors, through learning in a safe and fun way without the risk of losing their capital.'

Giving YIP the thumbs-up is Mr Stanley Ho, 23, an undergraduate who has been with the programme for nearly a year.

'YIP regularly organises friendly competitions in schools to encourage students to try their hand at investing and to test out their strategies without the fear of losing a penny. YIP is also a great platform to network with many like-minded peers, exchange ideas and learn new strategies,' he said.

With the lowering of the age limit, should young investors jump into stocks?

Rather then rushing in and trading straight away, both Mr Hui and Mr Terence Wong, head of research at DMG & Partners, said investor education is key.

'Start trading only when you have acquired sufficient knowledge,' Mr Wong said.

Mr Hui advised young investors to get their priorities right.

'I would advise students to concentrate on their studies first and learn about investing though reading, attending seminars and activities, and practising in the virtual trading environment before investing with real money,' he said.

For those who feel they are ready to start, one suggestion is to identify stocks that can be held as long-term investments instead of speculating in the market short- term, he added.

Here are some tips for young investors:

Check your financial situation

The first question to ask, said Mr Andrew Ler, Singapore Exchange's senior vice-president and head of private investors, is whether you have extra money or investable funds that can be used for investment.

This is after you have set aside funds for daily use, education and insurance, as well as emergencies.

Make sure you are investing and not speculating

Investing means doing your research, understanding the fundamental reasons for investing in a particular stock and having a game plan, said Mr Ben Fok, chief executive of Grandtag Financial Consultancy.

Speculation means buying based on rumours - a strategy that can make or break your investment.

Keep it simple

Investing in too many stocks can be a hassle when it comes to monitoring their progress. It is recommended you have not more than seven stocks in your portfolio, said Mr Fok.

Mr Ler said having multiple stocks may be a problem if the investment amount is too small. 'In such a scenario, you should consider index-linked instruments such as exchange-traded funds (ETFs) to diversify risk,' he said, adding that ETFs are safer than investing in a single stock.

ETFs allow investors to buy a basket of stocks that mimic the performance of the entire stock market.

Invest what you can afford to lose and think twice before borrowing to buy stocks that are then used as collateral for the loan

This is the basic advice for all investors.

Borrowing, or going on margin, is a risky technique involving the purchase of stocks with borrowed money, using the shares themselves as collateral.

It is a double-edged sword and it can either make you very rich or very poor, warned Mr Fok.

Adopt a dollar-cost averaging plan

This means that you invest in small sums regularly over time, instead of just one lump sum.

This enables you to buy more when the market is down and less when the market is up. Such an investment strategy is key to avoid getting ruined in the stock markets, said Mr Fok.

Don't panic if you are on the wrong side of the market

If you are already invested in the market and are sitting on huge losses, do not panic.

Evaluate the fundamentals and ask yourself whether to hold or average down. Time is on your side.

Here's what a young investor can do if he has three different investible amounts of $10,000, $30,000 and $50,000:

$10,000 - $30,000

Mr Fok's advice is to put your money into unit trusts if you do not have the time to invest on your own. Build up at least $30,000 before investing directly in the stock market.

Mr Ler recommends ETFs as they are available in small lot sizes, with some available in as few as 10 shares, which make them affordable and useful for diversification.

$50,000

If you have the time, you can consider some blue chips and medium- sized companies.

Since you are young, you can consider higher beta stocks and stocks with strong growth prospects, said Mr Fok. High beta stocks are those that swing more than the market over time.

More sophisticated investors may want to learn about index futures and extended settlement contracts for hedging purposes, because of its low capital outlay and costs, said Mr Ler.

And if you prefer an annual yield and are interested in property-related investments, you can consider real estate investment trusts.

This article was first published in The Straits Times.