Beginner’s guide to stock investing in Singapore

What comes to your mind when you think of the term investment? The stock exchange and shares of large companies, right? Typically, when people hear the term investment, their first thought is buying and selling stocks. However, considering the technical nature of investments, which is often compared to gambling, many people in Singapore fear to invest. But, investment is an essential part of your personal financial management. By investing you make productive use of your money, which otherwise would be lying in low-interest rate bank deposits and also be prone to the risks of inflation.

If you understand the importance of investing and wish to commence the activity, then the stock exchange could be your natural first choice. Irrespective of whether or not you are acquainted with investment concepts, you will be aware of the Singapore Stock Exchange or SGX. It’s the place where you can buy and sell stocks of companies listed on the exchange. But, how do you start? Is there any procedure? Are there any specific products that ought to be known of?

Dealing at SGX is not like your normal shopping. There’s much more to investing. If you’re interested in investing, then use this guide to investing in stocks and embark on your journey of investment.

Understand Your Financial Status

You may be enthusiastic about investments, but you cannot put all your money into the stock market. Think about it. The nature of the stock market is volatile. Economic and political factors can have a huge impact on the value of stocks. Hence, it is prudent to have a strong financial plan in place before you start investing. You should have emergency savings, a budget for expenditure, insurance, and money allocated toward clearing debts. If you’re focusing on long-term investments, then you should ensure you have enough money for at least the next 6 months. After all, the last thing you want is to sell your stocks to meet your needs.

Open a Brokerage and CDP Account

Before you start buying and selling stocks, you need to open two accounts – a brokerage and a CDP account. Having a brokerage account makes the process of buying and selling stocks on the exchange easier. Singapore has a variety of stock brokerage firms to choose from. CIMB Securities, DBS Vickers, FSMOne, OCBC Securities, and Standard Chartered, are some of the firms with whom you can open an account. Make sure you select the one that best suits your needs. From the payment means to the possibility of overseas trading, scrutinise each one of them and then select the one that fits in your preferences. Most brokerage firms charge commission rates that range from 0.12% to 0.275%. Once done, the next step is to open a CDP or the Central Depository Account. Your CDP account is your wallet, where you can store all the stocks you buy on SGX. When you buy a particular stock through a brokerage firm, the stock automatically goes into your CDP account.

Get Acquainted With Basic Concepts and Investment Products

Investment products are not limited to stocks of companies. The stock exchange offers a variety of asset classes to choose from. Some of the asset classes that you can find on SGX are retail bonds, real estate investment trusts, exchange traded funds, warrants and daily leveraged certificates. Each of these has their own nature. For instance, unlike stocks, retail bond prices don’t fluctuate as much, and this makes them a stable asset class. Selecting the asset classes you want to invest in depends on your investment goals and horizons. A longer horizon provides you the bandwidth to take risks, and you can invest in multiple stocks. But, if you are looking at a specific goal for which you need to cash out your investment, then you need to go for something stable. In addition to this, know and understand basic investment concepts like risk and return, asset allocation, and diversification.

Devise a Strategy

The stock exchange is a lucrative place. Once you start investing, get the hang of it, and succeed, you may want to do more and do it more quickly. Considering the nature of investments, it is imperative you go slow and steady at the start. Set small and realistic goals in the beginning. You can start off with index investing, which allows you access to a diverse portfolio of quality firms. Gradually, you can expand your portfolio to include more asset classes and firms. Your strategy should also include the amount of money you will invest and when. Set an amount each month to invest. Make sure you diversify your portfolio with different types of assets and entities to minimise your exposure to risk. Your investment strategy should align with your risk appetite and objectives.

Constantly Monitor Your Investments

Once you get familiar with investing, you may learn new strategies and experiment with different asset classes. There’s nothing wrong with it. But, make sure your investment strategy, at any point, aligns with your goals. Whether your goal is to save for your retirement or simply have a secondary source of income, you need to constantly review your investment portfolio to stay aligned with your objectives. Some stocks that seem promising today may not seem as fruitful tomorrow. A portfolio review allows you to make sure your objectives are met and you are gaining maximum returns.

Staring to invest early is recommended for greater returns and reduced risk. So, if you’ve not yet started, use this guide to investing in stocks to commence investing.


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