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How to Decide Which Investment Brokerage in Singapore Is Best For You

Peter Lin 0 Comments

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Let me guess… you’re fresh out of university, you’re raring to start your career and you think you’re financially savvy and you’ve heard all about the money you can make from buying and selling stocks and shares. Then you realise just how many options you have when it comes to finding a brokerage firm. How do you decide which is best for you? It could make all the difference between whether you’re just breaking even or if you’re actually going to make money from your adventure on the stock market.

 

What is a brokerage firm?

Very simply, a brokerage firm allows you to buy and sell shares on the stock market. They charge commission fees for each transaction you make. That means that when you buy shares, you get charged. When you sell your shares, you also get charged. That’s why it’s always important to find out how much commission fee a brokerage firm charges you.

 

Before you get started…

First you need to open a CDP Securities Account. To be eligible to open an Account, you need to be at least 18 years old and NOT an un-discharged bankrupt. You can either do this directly with The Central Depository (it’s a very straightforward process) or create a sub-account with a “Depository Agent” – a stockbroking firm, trust company or bank nominee. Basically, while you can deal with as many different brokerage firms as you want, you only need to open one CDP securities account to deposit all the stocks you’ve bought.

 

Which brokerage account to choose?

There are several differences between the available brokerage firms in Singapore, and ultimately, it’s up to you to decide which brokerage firm is best for you, depending on your needs. It’s kinda like picking the best credit card in Singapore – everyone’s going to name a different one.

Here are three main factors you need to look out for when choosing the best brokerage firm for you:

 

1. Commission Fees

Like I said earlier, you get charged commission fees on every transaction you do, buy or sell. If you’re the kind of investor to just “park” your money and not think twice about it, commission fees won’t make much of a difference to you. But if that’s really your investment strategy, then perhaps you should be looking at other long-term products like fixed deposits or Singapore Savings Bonds.

So because you expect to be charged commission fees multiple times, you should not pick one that charges exorbitant rates. On the other hand, depending on how much you’re planning to invest, you could also be caught by the minimum fees. This refers to the minimum commission charged, regardless of how little you’re trading. So if you’re a small time investor, you might want to take note of this as well.

Of course, while fees is an important consideration, this should not be your only deciding factor.

 

2. Trading Platform

In the past, many trades required investors to call their brokers and deal with them directly. Furthermore, they had to rely on stock prices and other information that may not be updated instantaneously. Those days are long gone. Brokerage firms these days offer online trading platforms or even iOS apps that allow you to check stock prices and make trades on the go.

Of course, if you don’t have any iOS devices, then you might be limited to those firms that have Android app support. Or, you know, don’t become addicted to watching stock prices going up and down and getting all kinds of stressed.

 

3. Who holds the stocks? CDP or Custodian

This is generally a non-issue because most brokerage firms allow you to hold your stocks with the CDP. What this means is that while you buy and sell stocks through most firms, the stocks themselves are held by you. Currently, only two brokerage firms – Standard Chartered and SAXO Capital Markets – hold your stocks in custodian accounts. What this means is the custodian account (e.g. Standard Chartered) owns the stocks on your behalf.

This also means that they have certain rights over stocks that you have bought. Furthermore, on the very slim chance that the firm goes bankrupt, you will lose all your stocks because it is technically not in your name.

 

Comparison of brokerage fees

Here’s a list of the more popular brokerage firms in Singapore and their fees. All trading fees are based on online/mobile trades done in the Singapore market.

 

Brokerage Firm Minimum Fees Trading Fees (based on contract amount)
<$50k $50k to $100k >$100k
AmFraser $25 0.275% 0.22% 0.18%
CIMB Securities $25 0.275% 0.22% 0.18%
Citibank $28 0.25% 0.20% 0.18%
DBS Vickers $25 0.28% 0.22% 0.18%
RHB Securities (formerly DMG) $25 0.275% 0.22% 0.18%
Maybank Kim Eng $25 0.275% 0.22% 0.18%
Lim and Tan $25 0.28% 0.22% 0.18%
Phillip Securities (POEMS) $25 0.28% 0.22% 0.18%
OCBC Securities $25 0.275% 0.22% 0.18%
SAXO Capital Markets $15 0.12% 0.12% 0.12%
Standard Chartered $10* 0.20% 0.20% 0.20%
UOB KayHian $25 0.275% 0.22% 0.20%

(*with effect from 1 August 2016, Standard Chartered currently has no minimum amount)

As you can tell from the table above, the two brokerage firms that don’t hold your stocks in CDP have the lowest minimum fees and commission rates. However, those lower fees do come at a slightly higher risk, which may or may not affect your decision to go with them.

 

One final word…

Do take note of optimal trading volumes. You’ll notice that, in general, the lower the transaction amount, the more expensive the commission. So if you’re trading close to $50,000 or $100,000, it doesn’t make sense to pay the higher commission. You may be better off saving up till you can afford to make a higher transaction and incur a lower commission fee rate.

The same thing goes for small-time investors. Generally, you should be trading at least $10,000 per transaction if you want to avoid paying the minimum fee, which will end up being a much higher percentage of your trade than if you were to trade higher.

 

Do you have any other advice for new investors who want to try out a brokerage firm? We want to hear from you.

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Peter Lin

I am the poster boy for reinventing one's self. I've been a broadcast journalist, technical writer, banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you'll ever meet, which is why I'm also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.

  • Reinphd

    “This also means that they have certain rights over stocks that you have bought. Furthermore, on the very slim chance that the firm goes bankrupt, you will lose all your stocks because it is technically not in your name.”

    Are you sure this is true? SCB can’t touch the shares in the custodian account

  • jytang

    One question about the minimum fee for the brokerage fees. Does that mean that we have the pay for the minimum fee per transaction (buy/sell) made which is the $25 offered by most of the brokerage firms? Or isit a one time thing and that the trading fee is incurred per transaction?

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