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How to save money? Saving money is essentially hoarding. You might make a little extra cash from the interest generated from your 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 is aligned with your investment goals, educational needs, and learning style is fundamental to your success as an online investor. While all online brokerage firms may provide you with the convenience of investing online, the fees structure, platform features, and customer support accessibility may vary. Strike the right balance by using the following guide to choose the brokerage for you:
|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|
What is the difference between stocks CFDs and stocks? When you trade stock CFDs (Contract for Difference), you do not buy or sell the actual stock but are simply purchasing a contract which allows you to speculate its price movements. Share trading, on the other hand, is when you purchase a stock and have legal ownership of the stock – either in your personal CDP (Central Depository Singapore) account where purchased stocks are held in your name, or your custodian account managed by your brokerage firm. The same applies for other asset classes as well, so you may find FX CFDs, commodities CFDs, ETF CFDs, and more. No matter which asset class, CFDs are leveraged products – meaning you will only have to deposit a fraction of the actual asset value per trade. This way, you are trading on margin – and while your profits will be magnified, your losses will be, too. Take for instance, if the margin requirement of stock CFDs at your brokerage is 2%, and you want to buy an asset with a total value of SGD$100,000, you will only essentially need to fork out S$2,000 from your funds to trade this stock CFD of choice. If the total asset value appreciates by 1% and is now worth S$101,000, it theoretically means you have gained $1,000 from your $2,000 – or a return of 50%. That's to say, a 2% margin means you are leveraged 50 times (1 / 0.02), so your profits and losses are multiplied 50 times for a 1% move in the asset, or 100 times for 2% move, and so forth.
Login to any online brokerage website and you will find a list of trading products: stocks, ETFs, bonds, commodities, options, futures, funds, forex, and CFDs. These products can be further differentiated into two categories: asset classes, and financial instruments. What's the difference? Asset classes are the products that you can trade or invest in, while financial instruments are the different ways or methods you can trade securities across asset classes.
When investing, the key to a balanced risk profile is diversification. Take this simple example: if you were to invest all your funds in one or two stocks and these companies go bankrupt, you will likely lose all the money you have invested. To lower your risk, you would want to buy different stocks, or approximately 20 to 30 stocks. Alternatively, you can diversify your investment portfolio by investing in different asset classes such as bonds, currencies, and REITs instead of sticking to only conventional stock investing. Finally, consider investing 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 on random investment choices without knowing how well your investments will perform.
CFD stands for Contracts of Difference where two parties agree to exchange the difference in value of a specific asset from the time that the position is opened until it is closed. When you buy or sell a position, you can incur profit or losses depending on the market movements. Given that a CFD is a derivative product, its value is always 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. Do take note that there will be overnight financing charges – an important fee in CFD trading which can significantly affect your profits. Some popular CFD products include: