So your new year’s resolution is to finally start investing! Don’t worry, that’s a much more achievable goal than last year’s resolution of losing 10kg.
You’ll hear of any number of stock investing strategies being promoted by anyone from self-styled investment gurus to your parents’ kopitiam friends, but unless your ambition is to become a day trader, you don’t need to master complex charting techniques or technical analysis.
With many low-cost investment brokerages and a huge range of investments to suit any risk appetite out there, we believe that any average Joe can get started on investing.
Here’s how to buy stocks in Singapore in 5 easy steps.
Step 1: Open an investment brokerage account
Stocks cannot be bought at a shop and taken home in a plastic bag. In order to buy and sell your stocks, you’re going to need to do so through an account with an investment brokerage. A brokerage is a company that acts as the middleman between you and the stock exchange.
Brokerage accounts charge trading fees as a percentage of each trade, and some might also impose a minimum fee, that is, the minimum trading fee you must pay on each trade. These will impact your profits, so make sure you compare.
If you’re just starting out, we recommend SAXO Markets or Phillip Securities (POEMS). These have very low fees and no minimum commission if you buy stocks on the Singapore Exchange.
- Min. Commission Fee SG Stocks
- Stock Holding Type
- Min. Funding
Other than fees, you might also want to preview the broker’s online platform. You’ll be investing through that platform, so if the idea of navigating a complex portal scares you, pick a broker with a simple and intuitive one that’s not buggy.
Also, cheaper brokerages like the ones above typically hold your stocks on your behalf, in a “custodian account”. If you want to own Singapore stocks officially under your name, you’ll need to open a Central Depository Account (CDP) as well. The brokerage fees are likely to cost more.
Step 2: Fund your investment brokerage account
Before you can begin trading, you need to transfer money to your account. Your brokerage might have a minimum funding requirement, so you’ll need to make sure you have the requisite amount.
Brokerages usually accept multiple funding methods, such as the following:
- FAST transfer via internet banking
- PayNow transfer
- Remittance from overseas, such as with services like TransferWise
Step 3: Decide on what stocks to invest in
The first 2 steps were the easy part. Step 3 is where you go from navel gazing to actual investing.
Here are some popular buys that are considered stable and relatively safe bets for beginners.
Blue chip stocks
“Blue chips”, such as Singtel, DBS and Keppel, are giants in Singapore’s economy. They may not grow crazily like certain overseas companies (think Tesla) but they’re widely regarded to be super-stable. Many investors hang on to these stocks for long periods and collect dividends.
Read more: The MoneySmart Guide to Buying SGX Stocks
Exchange Traded Funds (ETFs)
Know what’s even “safer” than Singtel? ETFs such as the Straits Times Index (STI) ETF and the ABF Singapore Bond Index Fund. These are mixed goodie bags of assorted stocks (or bonds or other assets), typically the top X best performing ones. So if Singtel somehow dies, your STI ETF (which tracks the top 30 companies in Singapore) won’t be as badly affected as Singtel shares.
Real Estate Investment Trusts (REITs)
Wanna be a landlord without all the hassle? REITs like Mapletree, CapitaLand and Ascendas allow you to be part-landlord at a variety of commercial properties, such as shopping malls and office buildings. The big names are considered fairly foolproof in the long term (COVID-19 notwithstanding) and tend to pay out fat dividends.
Read more: The MoneySmart Guide to Investing in REITs
Step 4: Buy your first shares!
Once your funds have been cleared, you can buy shares using your broker’s desktop or mobile platform. Hopefully, in Step 1 you did not choose a brokerage with an overly complex platform.
We’re not here to tell you what strategy to take, but if you have never invested before and don’t have oodles of cash, you might want to keep things simple by spending a fixed amount every month on a generic ETF such as the STI ETF. This method is called dollar cost averaging and helps you make investing a regular habit.
If you’re going to use the dollar cost averaging method, timing the market is not important. The idea is that over the long term, the ETF will rise, and by buying a small, fixed sum every month you’re spreading out your risk through many ups and downs. So you can jump in whenever you can and make sure you are consistent with investing a bit more every month.
If you have a bit more cash to spare, buying a selection of the 3 types of securities listed in Step 3 above will give you a fairly stable, “safe” portfolio.
Just make sure you check historical share prices (obtainable through your brokerage’s platform or even Google) and watch the market for opportunities to buy at a good price.
Step 5: Chill out and collect dividends
The Singapore stock market tends to favour passive investors who just want to sit back and collect regular dividends, rather than search for stocks with high growth potential.
(On the other hand, if you’re looking for “growth” stocks like Tesla, Google and the like, you’ll need to buy them on overseas exchanges. Which, actually, is also really easy. See our guide to buying stocks on the US market for more.)
Most dividend-yielding stocks pay out 4 times a year, ie. every quarter. There are some exceptions, however, with certain stocks dishing out dividends anywhere from 1 to 12 times a year.
Some brokerages give you the option to automatically reinvest cash dividends. If you don’t pick this option, you will receive the dividends in cash. You can then choose to either promptly reinvest the cash in line with the dollar cost averaging method, or hold onto it until you find good deals on the market.
And… that’s all there is to it! For the average Joe who just wants to buy and hold some quality stocks, investing passively for the long-term is really not rocket science.
Of course, depending on how closely you want to manage your portfolio, there might be more to learn. But for now, you already know enough start. Good luck!
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