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In short, saving money is essentially hoarding. You might make a little extra on interest from a savings account, but it won’t amount to much. Investing, on the other hand, is about growing your money through the purchase of assets that appreciate in value or generate income. These assets can include stocks, bonds, art, and property. You’ll need to save and invest to reach your financial goals.
Finding the right brokerage that aligns with your investment goals, educational needs and learning appetite is fundamental to your success as an online investor. Though all digital brokerage firms provide you with the convenience of investing online, their fees structure, platform features and customer support vary quite considerably. Find the right balance between different aspects of online investing using the following criteria:
|Brokerage Firm||Min. Fees SG Stocks||Min. Fees US Stocks|
|Saxo Markets||S$10||US$ 4|
|City Index||S$10 (CFD Stocks)||US$15 (CFD Stocks)|
|CMC Markets||S$10 (CFD Stocks)||US$10 (CFD Stocks)|
|IG||S$15 (CFD Stocks)||US$ 10 (CFD Stocks)|
|UOB KayHian||S$18||US$ 20|
|OCBC Securities||S$25||US$ 20|
|DBS Vickers||S$25||US$ 25|
|TD Ameritrade||Not Applicable||US$10.65|
|Philips Securities||S$ 8||US$ 6.88|
With Stock CFDs (Contract for Difference), you do not own the underlying stock or asset but are simply purchasing a contract which allows you to speculate on the price movements of the underlying stock. With share trading, when you purchase a stock, you have legal ownership of the stock. In Singapore, you may be required to open a CDP (Central Depository) account where the stocks are held in this account under your name. The same applies for other asset classes as well, so while you may trade outright stocks, FX, commodities, ETFs, some brokers offer CFDs products on these assets. Another thing to note is that CFDs are a leveraged product, so which means you are only required to deposit a percentage of the actual notional amount of the asset you are purchasing and you profits or losses can be magnified. For example, if the margin requirement of a product is 2% and you what to buy an asset that costs SGD$100,000. You will only need S$2,000 of your own funds. If the asset appreciates by 1% and is now worth S$101,000, it means you have made $1,000 from your $2,000 - a return of 50%. Another way of looking at it is this way. A 2% margin means you are leveraged 50 times (1 / 2%), so your profits and losses are multiplied 50 times for a 1% move in the asset, 100 times for 2% move and so forth.
To be more specific, products can be differentiated between Asset Classes & Financial Instruments. Asset classes are what you can trade or invest in, and financial instruments are the different ways you can trade securities across asset classes.
When investing, the key is diversification. If you were to invest in one or two stocks and these companies go bankrupt, you will likely lose all the money you have invested in these stocks. Hence to lower your risk, the idea is to buy different stocks where the ideal number to have in your portfolio is approximately 20 to 30 stocks. Alternatively, you can diversify by investing in different asset classes such as bonds, currency and REITs and not stick to solely stock investing. Another option would be to invest in ETFs or mutual funds which are diversified in nature. Here are the steps to start trading stocks in Singapore:
An investment portfolio that’s property diversified will exhibit the following characteristics:
Diversification depends on your individual goals. Your portfolio must be diversified based on how long you want to stay invested (investment horizon) and what your financial end goal is. Ideally, you should speak to a stock broker or a financial adviser (FA) regarding your goals. The last thing you want to do is spread your capital around on random investment choices without knowing how well your investments will perform.
In a nutshell, CFD stands for Contracts of Difference whereby 2 parties agree to exchange the difference in the value of a specific asset from the time the position is opened until it’s closed. When you buy or sell a position, you can incur profit or losses depending on the direction the market moves. Given that a CFD is a derivative product, its value is based on an underlying asset. However, CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. Also, do take note of the overnight financing charges, an important difference between CFD trading and share trading, which can significantly reduce your profits. Some popular CFD Products Include: