Best Investment Brokerage Account for SGX Stocks 2020

Reasons to invest in SG Stocks

Saving money in your bank account is only the beginning of your wealth accumulation journey. However, with bank interest rates remaining low and oftentimes lower than the inflation rate, we have to find investments that generate higher returns higher to stay ahead of inflation. One common investments investors turn to are shares. Investing in shares has several advantages.

Capital growth

Shares have the potential to increase in value over time. When we buy shares in a company, we are essentially owning a part of the business. Over time, the business can have growth in their profits when their business expands. Hence, the value of our ownership in the business will also increase resulting in a growth in share price. This growth in share price is known as capital growth and if we sell the shares, the profit earned is termed as “capital gains”. In the event if we sold the shares at a lower price than the price we got it for, it will result in a “capital loss”. When buying Singapore stocks, there is no income tax due on sales of shares as there is no capital gains tax.

Dividend yield

Besides selling shares, shares can generate returns when we hold them in the form of dividends. When a company makes a profit, it can use the profits for multiple purposes. The company can reinvest their profits into the company to grow the business, keep it for future opportunities and/or distribute it amongst the shareholders as dividends. Dividends can be paid annually, semi-annual or quarterly. For those who are looking to earn a passive income, you can look for companies that have consistent dividend payouts. Similar to capital growth, dividends paid by a Singapore resident company is not taxed which is an advantage of buying Singapore stocks.

Diversification

Investors can invest in shares of different companies with small amounts of money as only a minimum of 100 shares is required each. There are over 700 listed companies on the Singapore Exchange. Each of these companies are of different businesses targeting different markets with varying growth. By investing in more than one company, we are not making a huge investment on a single company which allows us to spread our risk. An alternative to diversify our investments can be done through Exchange Traded Funds or Unit trusts.

Liquidity

The liquidity of shares is a selling point for many investors as we can purchase or sell shares easily when we want to. The only requirement is that the number of shares (or ETFs) bought or sold has to be a minimum of 100. This can be done via a brokerage’s online services or the broker’s representatives.

Transparency

When buying into SG shares (or ETFs), we are able to easily check the market price of the shares which is the price the shares are bought and sold at. This is because the shares are listed and traded on the Singapore Stock Exchange. By knowing the market price, we can then decide whether to sell or purchase the shares at the current market price or to wait for our desired pricing which may take a longer time.

How to calculate dividend payments

Dividends payouts can be expressed as simple dividends per share (DPS), or as a dividend rate. DPS simply states how much you will get per share (e.g. $0.40 per share), while the dividend rate is a percentage of the share’s nominal value. So a dividend rate of 5%, on 1,000 shares, priced at $0.80 each, would work out to: 5% x $0.80 x 1,000 shares = $40.

SG Stocks Brokerage Fee Comparison

Broker Name	Minimum Fees (SGD)	Contract Value Fees
Philips Securities (prepaid)	$10	0.12%
UOB KayHian (prepaid)	$10	0.12%
Standard Chartered	$10	0.20%
Saxo Markets	$15	0.10%
CGS-CIMB Securities	$15	0.25%
OCBC Securities (prepaid)	$18	0.18%
RHB Securities	$25	0.275% (for SGD50,000 and below)
DBS Vickers	$25	0.28% (for SGD50,000 and below)
Citibank	$28	0.25% (for SGD50,000 and below)

SG Stocks Brokerage Account Opening Requirements

Broker Name	Minimum Fund (SGD)	Myinfo Linked Account
Philips Securities (prepaid)	$0	Yes
Standard Chartered	$0	Yes
Saxo Markets	$0	Yes
CGS-CIMB Securities	$0	Yes
RHB Securities	$0	No
DBS Vickers	$0	No
UOB KayHian (prepaid)	$0	No
Citibank	$0	No
OCBC Securities (prepaid)	$1000 (below 21 years old), $2000 (foreigners)	No

Popular Investment Products to Invest in Singapore

Stocks

When investing in stocks, you will have partial ownership of the company you have invested in. It will also give you the right to the profits generated by the company in the form of dividends. However, do take note that depending on the company’s performance a company may or may not pay dividends. Hence, it is not only important to to understand the company you are buying into, but the industry it is in. Another plus point would be to check the dividend payout history to check the consistency of dividend payouts by the company.

ETFs

ETFs is a collective investment where you are investing in a basket of stocks (or bonds). An ETF aims to track a particular index. For example, the STI ETF tracks the Straits Times Index. The returns of an ETF are meant to match the index that it tracks. So for those who are unable to choose which stocks listed in the SGX to invest in, you can consider investing in ETFs instead.

REITs

REITs are like the real estate version of shares. While having shares allows you to have partial ownership of a company, REITs on the other hand allows you to be part-landlord of a chain of properties. One common example would be the CapitaLand Mall Trust.

Bonds

Consider a bond to be similar to a loan where you are essentially lending money to the bond issuer. Like loans, most bonds pay bond holders interest, have a principal loan amount known as the par value and a tenure (time till loan is repaid). Before the maturity date, bond holders will receive payments from bond issuers as a form of interest. Upon maturity of the bond, the issuer of the bond will pay 100% of the par value to bond holders.

Top 10 Blue chip SG Stocks to Invest in 2020

Company name	Share price (as of 19 May 2020)	Dividend yield
Singtel	$2.70	6.55%
Keppel Corp	$6.11	3.34%
ThaiBev	$0.66	2.87%
DBS Group	$19.61	6.47%
UOB Ltd	$19.84	5.46%
OCBC	$9.00	6.41%
Singapore Airlines Ltd	$3.70	5.42%
Wilmar International Ltd	$3.86	2.61%
ComfortDelGro	$1.56	7.25%
Genting	$0.77	4.76%

Risk Associated with Investing in SG Stocks

Capital risk

Capital risk is the possibility of losing the amount of money invested, either partially or fully. When investing in stocks, not every investor will profit from investing in shares due to various reasons. Hence, investors face capital risk when it comes to stock investments as there is no guaranteed return of the original capital as not everyone will profit when investing in shares.

Volatility risk

The stock market can be very volatile with the stock prices constantly changing ranging from yearly, monthly to even daily fluctuations. This presents significant investment risk as it is difficult to predict the movements of the stock market. That being said, volatility can also provide opportunities for investors to generate returns.

How to invest in SG stocks: 3 easy steps

Step 1Choose an investment brokerage firm

When investing in stocks, you have to sign up for a investment brokerage account before you can start your investments regardless of the stocks you want to buy on the SGX. By having a brokerage, it enables you to purchase and sell stocks on the SGX and some brokerage allows you to do so on other stock exchanges. There are many things to take note of when choosing an investment brokerage firm, with commission fee being one of them.

Step 2Open a CDP account

Based on the investment brokerage you have chosen, you may be required to open a Central Depository (CDP) Account, a subsidiary of Singapore Exchange (SGX). It provides integrated clearing, settlement and depository facilities for investors. Certain brokerages allow you to apply for both a brokerage account and a CDP account at the same time. Alternatively, you can apply directly via the SGX website.

Step 3Fund your investment account

Do take note if the brokerage account you have opted for is a prepaid account. If so, you are required to transfer funds into your account before you can start buying shares. In most cases for online brokerages, you can do this conveniently via PayNow transfer or bank transfer.

How do you choose what SG shares to buy?

Even though we have only one stock market (SGX) to buy SG stocks, there are over 700 companies listed. Choosing what to buy can be a hassle so before you start, there are some things you need to consider.

What are your investment goals?

Before you even start investing, you should always think out what you want to achieve out of it as the first step. This will help to guide you in choosing what to invest in. If you are someone who is looking for passive income, then your focus will be on dividend-yielding stocks. For someone who wants quick returns, your focus won’t be on dividends but perhaps on young companies that show positive indicators and potential for growth. So do take the time to consider your investment objectives first.

What is your risk appetite?

In terms of risk, are you willing to take higher risk or prefer to not worry too much about your investment. This can give you a guide to what kind of stocks are the most suitable for you. Do note that the general rule of “high risk, high (potential for) returns”. If you are someone who has a low-risk profile, you can consider to invest in blue chip stocks. Alternative, you can consider diversified investments such as ETFs or Unit trusts.

What is your investment style?

Do you plan to buy and hold your stocks for a long time? Or are you the hands-on type who wants to buy low and sell high frequently? This would help you choose the right investment brokerage. If you're a long-term passive investor, look for a secure, stable brokerage. If you're a day trader, then low commissions and quick response would be the most important factors for you.

How to Choose the Best Investment Brokerage for You?

When you want to invest in SG stocks (or stocks in general), you will realise that there are so many different brokerages. Here are some factors to consider when choosing your investment brokerage.

Commission Fees

Whenever you buy or sell shares, you will be charged a commission fee. This is important if you are planning to trade frequently and you will tend to look for a broker that charges low commission fees. If you are not trading frequently and more or the buy-and-hold investor, commission fee may be of lesser importance. Another fee you can take note in this case would be the minimum fee as you will be the minimum amount to be charged regardless of trade amount. This is especially important for those trading in small amounts. For example, if the minimum fee is $15 and commission fee is 0.5% of the trade amount, by investing $1000 the commission fee charged is $5. However, this falls short of the minimum fee so you will be charged $15 instead of $5.

CDP or Custodian?

Between a CDP brokerage account and a custodian brokerage account, there is no better one as each has their own merits. It boils down to what you value more as an investor. Ideally, you want your shares to be under your name. In that case, a CDP brokerage account would be more suitable. However, most of the cheaper investment brokerages are custodian accounts. Hence, if fees is something you are very concerned about then a custodian account may be more of your cup of tea.

Platform's Ease of Use

When it comes to online investment brokerages, it is more or less self-service. Hence, you would want a platform that you are more comfortable with so that you are able to trade your shares easily. Some platforms available are IOS mobile applications, android mobile applications and websites. So if you are someone who prefers trading on the go, a mobile application may be better. Do also check out the interface of the platform that it is easy for you to use and also understand.

Fund Transfer

Before investing in stocks, you will need to fund the brokerage account. It will be good to check the available methods of transferring funds for each of the different brokerages. Some methods available can be via bank transfer and PayNow. Choose a brokerage that provides your preferred mode of payment.

Research Availability

The brokerage you have chosen provides with analyst reports and updates on the market. Educational materials are also provided by certain brokerages such as demo accounts and tutorials. If you are interested in market research and analysis, this may be a point to take note of this when choosing your broker.

Customer Service

While online investment brokerage is oftentimes a self-service affair, one should not overlook customer service. A brokerage with good customer service comes in handy when you have enquiries and issues to resolve. Things you can keep a look out for are the ways you can contact the broker such via phone, email or live chat and the timings these options are available.

Frequently asked questions

How can I invest in SGX?: Open both a Central Depository (CDP) account and a brokerage account and fund your brokerage. Just 3 simple steps and you are good to go!
How do I trade SGX stocks?: Place your order through your chosen broker to either buy or sell shares. There are different types of orders so do take note of the difference. For example, a market Order is an order in which a broker would transact at the current available price. On the other hand, for a limit order the broker would only transact based on the maximum price (for buying) or minimum price (for selling) limit you have set.
Can I buy shares without a broker?: To invest in stocks listed on the SGX, you can only do so with a broker. Hence, there is a need to have a brokerage account to trade SG stocks.
Is it worth buying 10 shares of a stock?: Investment decisions should not be based on quantity of the stock but more on the quality. You should instead look into the company and the stock price to determine if it is worth owning. That being said, do note that when trading on the SGX, the minimum trade is 1 lot which is 100 shares.
Can foreigners buy stock in Singapore?: Yes it is possible as long as they have both the brokerage account and Central Depository (CDP) account.
How much does a share cost?: Shares are usually sold in lots of 100 (exceptions exist). The listed price of a share is the price of a single share. So if the share price is $1, and the share is sold in lots of 100, the minimum you have to spend is $100 ($1 x 100 share).

Best Investment Brokerage Platform for SG Stocks 2020

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