Equities Investing In Singapore: A Beginner's Guide

Investing in equities can be a great way to grow your financial future. In Singapore, you can invest in equities by purchasing stocks or shares of publicly listed companies, which are traded on the Singapore Exchange (SGX). Before investing, it's important to understand the risks and potential returns of equities, as well as how to navigate the process of buying and selling shares. This includes opening the right type of brokerage account, choosing the right stocks, and managing your portfolio over time. With careful research and a long-term perspective, investing in equities can be a rewarding way to build your wealth.

How to open a brokerage account in Singapore

To open a brokerage account in Singapore, you must be at least 18 years old and have a bank account with one of the following banks: Citibank, DBS/POSB, HSBC, Maybank, OCBC, Standard Chartered Bank, or UOB.

You can then apply for a Central Depository (CDP) account via the SGX website. You can either use your SingPass login or complete their online form. Alternatively, you can download and fill out the CDP application form, include your supporting documents, and mail it to the Central Depository address.

Once you have a CDP account, you can open a trading account with any local brokerage, which will be linked to your CDP account. You can do this online by downloading and filling out the application form, including your supporting documents, and mailing it to the brokerage's address. Or, you can go to the office of your chosen brokerage and have a representative help you complete the process.

Some popular low-cost brokerages among local investors include Interactive Brokers, Saxo Markets, FSMOne, Tiger Brokers, and moomoo.

Choosing an investment style

When choosing an investment style, it's important to consider your financial goals, risk tolerance, and the amount of time and money you can dedicate to investing. Here are some popular investment styles in Singapore to help you get started:

Passive Investing

Passive investing is ideal for those seeking long-term growth without the need for daily management. This strategy typically involves investing in Exchange-Traded Funds (ETFs) and using robo-advisors. ETFs are traded on stock exchanges and offer exposure to a diverse range of stocks or assets within an index, reducing the risk of investing in individual stocks. Robo-advisors are algorithm-driven investment platforms that can provide automated investment management services.

Dividend Investing

Dividend investing focuses on generating regular income by investing in bonds, blue-chip stocks, and Real Estate Investment Trusts (REITs) that are known for paying consistent dividends. Blue-chip stocks are issued by large, reputable companies with a strong financial track record. REITs are trusts that invest in a diversified portfolio of real estate assets, providing regular income and potential for capital growth.

Hands-Off Investing

Hands-off investing is a managed approach that utilises unit trusts and insurance products for those who prefer minimal personal involvement in decision-making. Unit trusts, also known as mutual funds, pool money from multiple investors, and a fund manager invests it in a portfolio of assets according to a specific investment strategy.

Active Stock Picking

Active stock picking is for investors willing to dedicate time and effort to analysing market trends and individual stock performance. This strategy aims for higher returns by allowing investors to select stocks that align with their goals and risk tolerance. It requires a good understanding of market dynamics and carries a higher risk.

Speculation

Speculation is a high-risk, high-reward strategy that involves investing in volatile markets such as cryptocurrency and foreign exchange (forex). It is suitable for investors with a significant risk appetite and a strong understanding of market dynamics.

Remember, you can always combine different investment styles to suit your individual needs and goals. It's important to assess your financial situation, conduct thorough research, and understand the risks and potential returns associated with each investment style before making any decisions.

How to pick stocks

Picking stocks can be daunting, especially for beginners. Here are some tips on how to pick stocks for those looking to invest in equities in Singapore:

Do Your Research

Before investing in any stock, it is crucial to conduct thorough research. This involves understanding the company's business model, financial health, historical performance, and future plans. Reading articles, analysing financial reports, and staying up-to-date with the latest news and market trends can help make informed investment decisions.

Diversify Your Portfolio

Diversification is a key strategy in stock investing. Spreading your investments across various industries, sectors, and companies can help manage risk. By diversifying your portfolio, you reduce the impact of any single investment on your overall returns. This strategy ensures that you are not overly exposed to the performance of one particular stock or industry.

Evaluate the Company's Financial Health

When considering a stock, it is essential to assess the financial health of the underlying company. Look at their revenue growth, profit margins, debt levels, and cash flow. Analyse their financial statements, such as income statements, balance sheets, and cash flow statements. Understanding a company's financial health can provide insights into its stability, profitability, and potential for growth.

Consider the Company's Competitive Advantage

Identifying a company's competitive advantage can help you pick stocks with long-term potential. Look for companies with unique products or services, strong brand recognition, innovative technologies, or a solid market position. These factors can contribute to a company's ability to generate sustained profits and outperform its competitors over time.

Analyse Valuations and Metrics

Stock valuations and metrics provide valuable insights into a company's performance and potential. Common metrics to consider include price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and dividend yield. Comparing these metrics within the same industry or sector can help identify relatively undervalued or overvalued stocks.

Stay Informed and Adapt to Market Changes

The stock market is dynamic, and it is essential to stay informed about market trends, economic conditions, and industry-specific developments. Keep up with news, follow analyst recommendations, and monitor your investments regularly. Being responsive to market changes can help you make timely decisions, such as buying during dips or selling when a stock reaches your target price.

Remember, investing in equities involves risks, and there is no guaranteed outcome. It is always recommended to consult with a qualified financial advisor before making any investment decisions to assess your financial goals, risk tolerance, and investment horizon.

How to buy stocks

Investing in equities can be a great way to grow your financial future. Here is a step-by-step guide on how to buy stocks in Singapore:

Step 1: Set Your Financial Goals

Before investing in the stock market, it is important to set clear financial goals and determine how much you need to save and invest to achieve those goals. This will help you plan and organise your finances effectively.

Step 2: Open a Brokerage Account

Once you have your finances in order, you need to open a brokerage account. You can choose between a custodian brokerage account and a CDP-linked brokerage account. A custodian brokerage account is suitable if you plan to purchase overseas stocks, as the broker will act as the custodian for your international transactions. On the other hand, if you plan to invest in Singapore stocks, you will need a Central Depository (CDP) account to store and safeguard your Singapore securities, including stocks, bonds, and other SGX-listed securities.

Step 3: Fund Your Account

If you have a custodian or pre-funded account, you will need to deposit money into it before you can start buying stocks. The amount you fund your account with will depend on how many shares you want to buy, the cost of the shares, and any funding requirements specified in the terms and conditions. It is important to consider your financial situation and set aside enough money for emergencies.

Step 4: Choose a Stock

When deciding which stock to purchase, look at well-known companies, both locally and internationally. Research the company's financials, historical data, and future plans to make an informed decision. Understanding the company's performance and prospects will help reassure you about your investment choice.

Step 5: Purchase the Stock

When using your brokerage platform to buy stocks, pay attention to the price and the number of lots or units you want to purchase. The minimum number of shares for Singapore stocks is typically 100. The final price you pay will include various fees, such as commission fees.

Step 6: Check Your Account

After making your purchase, verify that the order has been executed successfully. Depending on the platform, you may receive a notification via SMS or email. If you have a custodian account, you can check your wallet to see if the stock has been added. Alternatively, if you have a CDP-linked brokerage account, you can check your CDP account to view your consolidated Singapore securities purchases.

How to receive dividends

Dividends are a way for companies to distribute profits to shareholders. Profits not paid out as dividends are usually reinvested into the business. In Singapore, dividend income is tax-free.

If you've used a CDP-linked brokerage account to make a stock purchase, the stocks will be held in your CDP account, and the dividends will be credited to the bank account linked to your CDP.

If you've used a custodian account to purchase the stock, the dividends would be distributed into your custodian account. You can log into your brokerage platform to check for transaction notifications.

Frequently asked questions