Navigating the stock market
Want to make your money grow but don't know how? CHAI HUNG YIN speaks to experts
To start investing in the stock market, you need to open two accounts - a Central Depository (COP) securities account and a brokerage account.
You must be at least 18-years-old and must not be an undischarged bankrupt. Novice investors may not know which of the 12 brokerage firms in Singapore - many offering online and mobile trading platforms - they should pick. These are the criteria to look out for:
While the commission fees charged by brokerage firms are largely similar, there are exceptions. (See chart on right.)
Other transaction charges per trade include clearing fees imposed by CDP of 0.0325 per cent, SGX trading access fee of 0.0075 per cent and 7 per cent of goods and services tax (GST) on the total charge.
Most firms here also charge a minimum fee for each trade, except for Standard Chartered Singapore.
"Commission cost is always based on the notional transaction amount.
"For the same percentage commission, the absolute value will seem large for a small notional amount, but for a larger amount, it will be insignificant," says Mr Raymond Chin, head of e-broking at RHB Securities Singapore, formerly known as DMG & Partners Securities.
To illustrate how the charges impact your return, here is a sample calculation.
If you buy 100 shares of M1 stock last trading at $2.84 that cost $284, the charges you incur can be:
• a minimum fee of $25
• clearing fee of $0.09
• SGX trading access fee of $0.02
• GST of $1.76
So the actual cost of buying 100 M1 shares is $26.87 + $284, or a total of
When you sell the shares, you will incur a similar amount of cost, depending on the selling price.
That means to buy and sell the 100 shares, you will be slapped twice with the fee and GST of $26.87.
To reduce the impact of the minimum brokerage fee of $25, each trade should be around $9,100 in value, says UOB Kay Hian's vice president of equities and financial products, Mr Goh Yong Ren.
But with a larger amount, the potential loss could be greater, he adds.
Says Mr Goh: "It would be more prudent for investors to practise risk management instead of committing $9,100 per trade, so that they are not penny wise, pound foolish."
A cash-funded account usually has a lower commission rate, as transactions are settled with cash provided up-front and are not a credit risk, says DBS Vickers Securities' managing director for retail business, Mr Andrew Soh.
"A good brokerage should be able to provide access to timely and comprehensive market research reports to help investors stay abreast of the latest market developments and make sound investment decisions," adds Mr Soh.
HSBC Singapore's head of retail banking and wealth management, Mr Matthew Colebrook, says investors need to consider their individual investment needs.
"For high-frequency traders, low trading fees, high-speed platform, charting tools would be important.
"For medium- to longer-term investors aiming to build an investment portfolio, a one-stop shop that offers a wide range of investment products and consolidated view of wealth holdings would be important."
Online tools, charts and calculators can help investors make more informed decisions, says Mr Elgin Ting, head of products group at OCBC Securities.
"However, it is still crucial for a brokerage to have knowledgeable trading representatives and provide reliable customer service support, for the times when its customers need assistance beyond what a computer can provide."
People, Investing made easy ← , The New Paper On Sunday, November 1 2015, Pg 21