So everyone (or maybe just us at MoneySmart) has been bugging you to start investing in order to ensure you can retire at a decent age. So you’ve saved up a bit of cash, and you’re ready now… Well, not quite. You need to open a CDP account with SGX first.
How does the CDP account work?
Whether it’s something as simple as Singapore Savings Bonds or trading stocks on SGX, you’ll need to have a Central Depository or CDP account in order to proceed.
So what exactly is it? It’s an account you open with Central Depository of the Singapore Stock Exchange.
Just as you deposit cash into your savings account, whatever securities (e.g. stocks) you buy get deposited into your CDP account. These are exchanged for your cash, which is deducted from a bank account that you link to your CDP account.
When you sell your investments, they are deducted from your CDP account. Any cash you get in exchange is deposited into the linked bank account.
Some of the securities that your CDP account can hold include equities such as stocks, as well as Singapore Savings Bonds and other fixed income instruments.
If you’re investing through a brokerage, note that brokerages will also give you the option of trading with a nominee account. This means the broker will open an account to hold your investments on your behalf. However, using your own CDP account is usually cheaper.
How to open a CDP Account
For those of you who get easily discouraged or who hate paperwork, the CDP account requirement alone might be enough to make you give up.
Don’t give up! Opening a CDP account can be done online and is actually fairly straightforward. Follow our step-by-step guide:
Step 1: Make sure you have a bank account first
To open a CDP account, you will need to link it with a bank account at DBS/POSB, OCBC, UOB, HSBC, Citibank, Maybank or Standard Chartered. So make sure you have at least one such account first.
You also need to be at least 18 years old (sorry, whiz kids) and not be an undischarged bankrupt.
Step 2: Fill up the CDP application form
Step 3: Prepare your supporting documents
Before submitting your form, make sure you have attached the following documents:
(1) A photocopy of your NRIC, Malaysian ID card or passport
(2) One of the following:
(a) A bank statement from one of the abovementioned banks
(b) CPF statement, or
(c) Latest IRAS assessment
Step 4: Mail your application
Once you’ve got everything ready, mail the form and supporting documents to the following address:
The Central Depository (Pte) Limited
11 North Buona Vista Drive
#06-07 The Metropolis Tower 2
Step 5: Wait for notification
You’ll get some sort of notification, most likely by post, when your CDP account has been verified and is ready for you to use.
Is there any other way to open a CDP account?
Do you think letting somebody else peel prawns for you is preferable to doing it yourself? Then you might want to just get a brokerage to open your CDP account for you.
You will need a brokerage account to execute trades anyway, so you might as well milk it for all it’s worth.
If you’ve already picked a brokerage, you can get them to help you open a CDP account. They’ll just do what we did above — fill in a form, and submit it together with your personal and financial information. But hey, at least you’ll save yourself a stamp.
Should you decide to break up with this broker and jump ship, don’t worry. Your CDP account still belongs to you.
Your CDP account is like a hard drive on your computer, and the brokerage account the operating system. The hard drive contains the investments, while the OS gives you a platform to do stuff with. Just like how you can switch OS without losing what’s stored in your hard drive, you don’t have to worry about losing what’s in your CDP account when you switch brokerage.
How do you start using your CDP account?
The CDP account is just the first step of your investment journey.
Now that you have a CDP account, the next thing you should do is link it up with a brokerage account, if you haven’t already. Your broker will provide you with a platform you can use to trade with.
Your CDP account is free to use. However, you might have to pay your brokerage administrative fees or trading fees.
Using your broker’s platform, you’ll be able to do the following with your CDP account:
- Buy and sell stocks, Singapore Savings Bonds and other securities
- Participate in Dividend Reinvestment Programmes or take advantage of rights issues to buy more shares at a fixed price
- Attend AGMs and vote at companies for which you hold shares
Do you have any questions about CDP accounts? Ask away in the comments.
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