Connect with us

Industry News

Step-by-step guide to stock investing in Singapore

When you’re ready to start investing, the stock market can be a natural first place you turn to. Most Singaporeans, even if they never invested before, know about the stock market, or more specifically, the Singapore Exchange (SGX).

When you’re ready to start investing, the stock market can be a natural first place you turn to. Most Singaporeans, even if they never invested before, know about the stock market, or more specifically, the Singapore Exchange (SGX).

The SGX acts as a market for people to buy and sell stocks. For many, when you start investing, you will likely turn to an online platform to carry out your trades and start building your investment portfolio.

For a start, you may think of investing in well-known companies in Singapore, such as DBS, SingTel, OCBC, Keppel Corp, UOB, CapitaLand and more. These companies are all listed on the SGX and you can start adding them to your portfolio.

The SGX isn’t a grocery store where you can go to see, smell and touch what you’re actually buying and put them into your shopping cart.

So, how do you start investing in these companies? Here’s a step-by-step guide on how you can get started.

1. Open a brokerage account

Before you start buying stocks listed on the SGX, you first need to open a brokerage account.

Having an account with an authorised broker gives you access to buy and sell stocks on the SGX.

There are many stock brokerages in Singapore that you can choose from. Here’s a list of the stock brokerage firms in Singapore.

  • CGS-CIMB Securities
  • Citibank
  • DBS Vickers
  • FSMOne
  • KGI Securities
  • Lim & Tan Securities
  • Maybank Kim Eng
  • OCBC Securities
  • Phillips Securities (POEMS)
  • RHB Securities
  • Saxo Capital Markets
  • Standard Chartered
  • UOB Kay Hian

You would notice that many brokerage firms are either directly linked or have some form of affiliation with a commercial bank operating in Singapore.

Which brokerage firm should you choose?

alt

The first thing most investors look at is the commissions charged by the stock broker.

A quick check across brokers in Singapore would reveal that most firms charge similar commission rates between 0.08 per cent and 0.28 per cent of trading value, or a minimum of between $10 and $28 per transaction.

This would also vary depending on the type of trading account – CDP-linked or custodian – you choose to open.

Aside from commission charges, there are several other factors you should also consider when choosing a firm.

Fund Transfer: When you buy stocks, you need to think about how you’d like to pay for them. Some investors may find it more convenient to open a brokerage account with a bank that they already have an account with.

[[nid:494512]]

For example, if you already have an OCBC savings account, you may prefer opening a brokerage account with OCBC Securities.

By doing so, stocks that you buy can automatically be paid for using money in your designated OCBC savings account. When you sell stocks, the money would be automatically credited into the same account.

You can also easily link your bank accounts with any brokerage accounts that you open in Singapore.

You can then simply make an Electronic Payment for Shares (EPS) via online or at Automatic Teller Machines (ATMs). You may also choose to make payment via GIRO.

Overseas Investments: You may be starting out your investing journey with stocks listed on SGX. As you become more experienced and confident, you may venture into investing in overseas markets as well.

Many of the local stock brokerages also allow you to invest in some of the regional and major overseas stock markets, including US, Hong Kong, China, Malaysia, Thailand and others.

Do note that buying and holding overseas stocks tend to come with additional charges, including currency conversion rates and fees associated with custodian accounts.

Platform: Not all brokerage platforms are built the same. We suggest trying out a demo account whenever possible with the brokerage to sample the service and platform.

If you can’t try a demo account, you can find out from more experienced friends about how user-friendly the platform is before you open an account with any stock brokerage firm.

2. Open a CDP account

alt

If this is your first time buying stocks in Singapore, you also need to open a Central Depository (CDP) account.

Think of a CDP account as a vault that stores all the SGX stocks that you have bought in a centralised location.

In most cases, when you buy a stock through a brokerage firm, the firm doesn’t keep it. Rather, it goes into a CDP account held under your name.

[[nid:494179]]

The benefit of this is that you can easily move to another stock brokerage firm to continue buying and selling without worrying about your holdings.

Do note that not all brokerage firms will automatically deposit the stocks you bought through them into your CDP account.

For example, FSMOne and Standard Chartered do not offer CDP-linked accounts and will hold the stocks you bought as a custodian on your behalf.

Similarly, the stock brokerage firms that do offer CDP-linked accounts also offer their own custodian accounts.

Custodian accounts tend to offer lower brokerage fees as your securities are kept with them, and you will be retained as a customer rather than easily shifting to another stock brokerage firm.

However, custodian accounts do come with certain fees and charges that you should know as well.

3. Start off with a strategy

alt

When you are new to investing, it’s easy to become too excited and too overwhelmed, leading to you doing too much too quickly – which is typically a bad thing for new investors.

For a start, set for yourself small and realistic targets. You can start off with index investing, putting a small amount of money into the Straits Times Index (STI) Exchange Traded Fund (ETF) each month.

Index investing enables you to get exposure to a diversified portfolio of high-quality companies on the stock exchange.

Along the way, you can slowly add individual companies in Singapore and from overseas exchanges, or even other asset classes once you become more familiar with the investments.

Your initial strategy should also include how much money you are investing and how often you would invest.

[[nid:492883]]

Even if you already have $20,000 set aside to invest, it doesn’t mean you should plough it into the stock market all at once.

Instead, you can space out your investment over time.

Commonly referred to as dollar cost averaging (DCA), this strategy of investing a fixed amount of money on a regular basis, rather than investing it all at one go, allows you to invest without worrying about whether it is a good time to buy stocks.

The simple advantage that DCA brings is that it allows you to invest without having to worry about timing the market.

You simply buy more shares when prices go down, and less shares when prices go up as you invest at regular time intervals.

Always remember that your investing journey is a marathon, and not a sprint. You want to start off at a pace that you are comfortable with and take it from there, rather than to sprint out of the gates and make unnecessary, and costly, mistakes.

Neither are you racing against other investors.

Hence, do not simply copy the investment strategies of other investors without first understanding for yourself why each investment strategy may or may not work for you.

Always bear in mind that other investors may have their own risk appetite and investment time horizon.

4. Understand the various types of assets on the stock exchange

alt

It’s easy to assume that you can only find stocks on the stock exchange. While that might be true when SGX first started in 1973, today’s exchange comprises various asset classes beyond just stocks.

For example, you can find retail bonds on the exchange. These include bonds issued by Temasek Holdings’ backed Astrea, CapitaMall Trust and Aspial.

Unlike stocks, where people invest with the hope that prices appreciate over time as the companies grow, bond prices do not fluctuate as much and are generally traded near the price they were first launched at. That makes it a more stable asset class with predictable cash flows.

Other asset classes you can find on the exchange include real estate investment trusts (REITs), exchanged traded funds (ETFs), warrants and daily leveraged certificates (DLCs).

This makes it important to understand what it is that you are investing in, especially since some of these investments carry much higher risks.

5. Constantly review your strategy and investment objectives

alt

Once you get familiar with investing, it’s easy to continue building on your knowledge to learn more and to try out new strategies in order to make better returns. That’s fine.

That said, it’s always important to ensure that new strategies you introduce fall in line with your investment objectives.

[[nid:489645]]

For example, your original plan may have been to invest in high-quality dividend paying companies primarily to build a secondary source of income.

Along the way, you will definitely start reading up more and have conversations with friends and relatives who are in the “know”.

This may lead you to invest in companies on rumours or media hype, in the hopes of making a quick buck if the company turns around in the future.

This buy-low sell-high strategy would be very different from what you originally set out to do.

Always take the time to periodically review your strategy to ensure that it’s in line with your objectives.

Start Investing Today

There are of course many other areas of investing that you also need to learn.

You can even read the articles we have written about various types of investing mistakes that people make.

In the meantime, we always advocate for people to start investing early to benefit from a longer time horizon for their money to grow and ride out volatility.

This article was first published in Dollars and Sense.

Continue Reading
Advertisement

Daily Financial News

Don’t Count On JPY Correction; Staying Long GBP/JPY

The path of the potential pace of the JPY decline may still be underestimated by markets, which continue trading the JPY long.

While the 10% USDJPY advance from September lows looks impressive from a momentum point of view, it may no thave been driven by Japan’s institutional investors reducing their hedging ratios or Japan’s household sector reestablishing carry trades.

Instead, investors seemed to have been caught on the wrong foot, concerned about a sudden decline of risk appetite or the incoming US administration being focused on trade issues and not on spending. Spending requires funding and indeed the President-elect Trump’s team appears to be focused on funding. Here are a few examples: Reducing corporate taxation may pave the way for US corporates repatriating some of their USD2.6trn accumulated foreign profits. Cutting bank regulation could increase the risk-absorbing capacity within bank balance sheets. Hence, funding conditions – including for the sovereign – might generally ease. De-regulating the oil sector would help the trade balance, slowing the anticipated increase in the US current account deficit. The US current account deficit presently runs at 2.6% of GDP, which is below worrisome levels. Should the incoming government push for early trade restrictions, reaction (including Asian sovereigns reducing their holdings) could increase US funding costs, which runs against the interest of the Trump team.

Instead of counting on risk aversion to stop the JPY depreciation, we expect nominal yield differentials and the Fed moderately hiking rates to unleash capital outflows from Japan.The yield differential argumenthas become more compelling with the BoJ turning into yield curve managers. Via this policy move, rising inflation rates push JPY real rates and yields lower, which will weaken the JPY. Exhibit 12 shows how much Japan’s labor market conditions have tightened. A minor surge in corporate profitability may now be sufficient, pushing Japan wages up and implicity real yields lower.

JPY dynamics are diametrical to last year . Last year, the JGB’s “exhausted”yield curve left the BoJ without a tool to push real yields low enough to adequately address the weakened nominal GDP outlook. JPY remained artificially high at a time when the US opted for sharply lower real yields. USDJPY had to decline, triggering JPY bullish secondround effects via JPY-based financial institutions increasing their FX hedge ratios and Japan’s retail sector cutting its carry trade exposures. Now the opposite seems to be happening. The managed JGB curve suggests rising inflation expectations are driving Japan’s real yield lower. The Fed reluctantly hiking rates may keep risk appetite supported but increase USD hedging costs.Financial institutions reducinghedge ratios and Japan’s household sector piling back into the carry trade could provide secondround JPY weakening effects

Continue Reading

Daily Financial News

Mexico raises interest rates, cites Trump as risk

The head of Mexico’s central bank says U.S. Republican candidate Donald Trump represents a “hurricane” sized threat to Mexico.

Banco de Mexico Gov. Agustin Carstens told the Radio Formula network Friday that a Trump presidency “would be a hurricane and a particularly intense one if he fulfills what he has been saying in his campaign.”

Trump has proposed building a wall along the border and re-negotiating the North American Free Trade Agreement.

Mexico’s central bank raised its prime lending rate by half a percent to 4.75 percent Thursday, citing “nervousness surrounding the possible consequences of the U.S. elections, whose implications for Mexico could be particularly significant.”

Mexico’s peso had lost about 6 percent in value against the dollar since mid-August. It recovered slightly after the rate hike

Continue Reading

Financial News

Africa’s first Fairtrade certified gold co-operative offers hope to gold miners living in poverty

Syanyonja Artisan Miners’ Alliance (SAMA) has become the first artisanal small scale mining co-operative in Africa to become Fairtrade certified, bringing much needed hope to impoverished communities who risk their lives to mine the rich gold seam that runs around Lake Victoria.

SAMA is one of nine previously informal groups from Uganda, Kenya and Tanzania which has benefitted from a pilot project launched by Fairtrade in 2013. This innovative program aims to extend the benefits of Fairtrade gold to artisanal miners across East Africa.

In that short time, SAMA has undergone training in business and entrepreneurship, as well as safe use of mercury, internal control systems, labour rights and better working conditions, health and safety and more. Previously, daily contact with toxic chemicals used to process gold meant members risked disease, premature births and even death.  Fairtrade gold was first launched in 2011, and SAMA now joins Fairtrade certified gold mines MACDESA, AURELSA and SOTRAMI in Peru.

The co-operative produces just 5 kg gold per year, but nevertheless has the potential to significantly benefit many people in the local community through better conditions through certification. It is expected that Fairtrade and organizations like Cred Jewellery will support the miners, ensuring their gold can be refined and made available to jewellers in the UK and other markets.

Gonzaga Mungai, Gold Manager at Fairtrade Africa said: “This is a truly momentous and historical achievement and the realisation of a dream that is many years in the making. Gold production is an important source of income for people in rural economies. Congratulations to SAMA, it sets a precedent which shows that if groups like this can achieve certification, then it can work for others right across the African continent.”

The Fairtrade Gold Standard encourages better practice and changes to come in line with international regulation around the production and trade of so-called ‘conflict minerals’. Under the Standard, miners are required to:

  • Uphold a human rights policy preventing war crimes, bribery, money laundering and child labour
  • Clearly represent where the minerals were mined
  • Minimise the risks of conflict minerals through robust risk assessments and collaboration across supply chains
  • Report to buyers and trading partners regarding the risks of conflict minerals

Now in its second phase, the programme will focus on supporting other mining groups in the region to access affordable loans and explore a phased approach to accessing the Fairtrade market, allowing more mining co-operatives across Africa to participate in the programme.

Gonzaga added: “Sourcing African metals from smallscale miners in the Great Lakes Region is the responsible thing to do. For a long time companies have avoided buying gold from this region, with devastating consequences for impoverished communities who were already struggling. It has driven trade deeper underground, as unscrupulous buyers pay lower prices and launder illegal gold into legitimate supply chains. That’s why we have chosen to work with these groups to help them earn more from their gold within a robust compliance system that offers social, environmental, and economic protections.”

The Fairtrade gold programme offers a small but scalable solution to sustainable sourcing of gold from the region in line with Section 1502 of the Dodd-Frank Act in the US, OECD Due Diligence Guidance and recent EU Supply-Chain Due Diligence proposals which could come into effect in 2016. This means that up to 880,000 EU firms that use tin, tungsten, tantalum and gold in manufacturing consumer products could be obliged to provide information on steps they have taken to identify and address risks in their supply chains for so-called ‘conflict minerals’.

Continue Reading

Trending