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How to buy stocks in Singapore (2022)
Start investing in the stock market today using our 6 step guide.
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How to buy stocks (2022)
- Choose a stockbroker: Find a stockbroker that matches your criteria
- Sign up for an account: You’ll need to be over the age of 18 to sign up
- Plan before you buy: Work out how much you can afford to invest and how long you’ll be holding the stocks for
- Choose the stocks you want to buy: Do you want to buy local stocks, global stocks, dividend-paying or penny stocks?
- Order your stocks: Search for the company name or ticker code and set a market or limit order to buy
- Pay for your stocks: Ensure you have enough funds in your account ahead of the settlement date
To buy stocks in Singapore, a Central Depository Account (CDP Account) is required. However, you’ll need to be at least 18 years old to open the account and there’s also a lot more to it than that. With stock market activity on the rise, it’s never been simpler for Singaporeans to start investing.
This guide will take you through the basics, including how to buy stocks online, how much it costs and whether it’s a safe option for you. If you’re ready to start buying stocks, you can select an online broker in the comparison table below.
Investing in stocks: how does it works
As the name suggests, shares or stocks represent a “share” of a company. When you buy a stock, you own a small part of a company. The price of your stock rises if the company is doing well and falls if it underperforms.
Just as you’d trade goods over Amazon or eBay, stock trading takes place over a digital marketplace known as the stock market or stock exchange. In Singapore, we have the Singapore Exchange (SGX), and in the United States, there’s the New York Stock Exchange (NYSE) and the NASDAQ.
How do you profit from trading stocks?
You make money from stocks the same as you would any other product – by selling for a higher price than what you initially paid. The difference between the buy and sell price will be your profit or loss.
The other way to earn money is through dividends. A dividend is a percentage of a company’s annual profit which some companies choose to pay to their shareholders. These are typically paid twice a year and you can either bank these or reinvest them to compound profits.
Step 1: Find a stockbroker
To buy and sell stocks, you’ll need to sign up with a stockbroker. You have two main options here – you can buy stocks online using a share trading platform or use a full-service broker.
Compare online brokers
Take a look at the online trading platforms available in the table below. Depending on what you’re after, it may save money to use more than one platform, for example, one for Singapore shares and another for overseas markets such as US or UK stocks.
Full service broker
A full-service broker is a traditional brokerage firm or investment bank such as Goldman Sachs and Morgan Stanley. These brokerages strive to build strong broker-client relationships through greater levels of personalised service (e.g. face-to-face interaction). You’d be assigned a broker who’ll offer professional guidance in your investment decisions and keep you informed of opportune times to invest in a given asset.
However, the main downside is that they charge a premium fee for such services, starting from $70 to $200 per trade. Also, bear in mind that traditional brokerages’ service hours may be limited compared to an online brokerage that allows you to fetch data on-demand.
Online broker
A cheaper and popular trading option is to use an online broker and execute your own trades. There are dozens of platforms available to Singaporeans — from bank brokerages like DBS Vickers and OCBC Securities, to independent brokerages like POEMS and Saxo Markets, and they typically charge a minimum fee from $0 to $25 per trade.
These brokerages typically offer user-friendly online trading platforms with advanced functionalities to help you screen stocks and manage your investment with ease. In addition, you’d also be able to access a host of sophisticated trading tools, including in-depth market research, investment ideas and analysis.
CDP-linked vs nominee account
Before you can begin trading in stocks and other listed securities, you’d need a Central Depository (CDP) or custodian account to hold the investments after purchase.
Most brokerage firms in Singapore offer investors the option to either store their investments in a CDP-linked account or custodian account. While both account types ultimately serve the same purpose, each comes with its own pros and cons.
CDP-linked account
Managed by the Singapore Exchange (SGX), the CDP account provides an integrated clearing, settlement and depository facilities for investors in the Singapore securities market — SGX. The trades are registered under your name and credited into your CDP account.
Pros
- Centralised location for your investments. You have the option to trade using different brokerages, but view all your stock holdings in a single account.
- Shareholder rights. By holding stocks in your own name, you’d get to enjoy the perks of being a shareholder of the company (e.g. attending annual general meetings and entitled to voting rights).
Cons
- Higher trading fees. CDP-linked accounts are usually subject to higher brokerage fees and minimum commission amount.
- Additional fees. CDP charges a Clearing fee (0.0325% of your contract value), SGX trading fee (0.0075% of your contract value) and SGX Settlement Fee of $0.35 (or equivalent in foreign currency per contract).
- Limited to local trades. The CDP account can only hold stocks traded on the SGX.
Nominee (custodian) account
A nominee account is a depository that’s managed by the respective brokerage firm. All stocks and securities are transacted and held on your behalf under the brokerage’s name. This means that the stocks are legally owned by the brokerage house.
Pros
- Lower trading fees. Enjoy lower brokerage and minimum commission fees.
- Privacy. Private custodian accounts offers an added layer of privacy to large investors who prefer not to reveal their investment moves.
- Ability to invest in overseas markets. If you’re buying overseas stocks, you will require a custodian account.
Cons
- Lack of shareholder perks. Since your investments are not registered in your name, you’ll not have access to shareholders benefits.
- Additional fees. Depending on the brokerage, you may incur extra costs such as account maintenance fees, foreign stocks custody charges and corporate action handling fees. Also, you’d typically have to pay transfer fees if you wish to transfer investments into your CDP account.
Step 2: Sign up for an account
To sign up to a broker in Singapore, you’ll need to be at least 18 years old and not an undischarged bankrupt.
Registering for an account with a broker is usually free, however do check if there’ll be any subscription costs, fund transfer fees or initial deposit requirements. If you’re a new customer, you’ll typically need to provide the following information:
- Personal details. Your name, address, date of birth, contact details etc.
- Proof of ID. NRIC or Passport with at least 6 month validity.
- Bank account information. Bank Account (DBS/POSB/OCBC/UOB/Maybank) or TT details (TT Bank Name, Account Number & Currency Details)
- Proof of residential address. If your mailing address is different from the address stated on your ID/Passport, you’ll need to provide supporting documents issued within the last 3 months (e.g. letters from government bodies, telco or utility bills, bank statements etc)
Depending on the broker you choose, it can take as little as a few minutes for your account to be approved or it can take up to a fortnight.
You may be asked to deposit a specific minimum amount in order to open an account although this isn’t always the case. For example, Saxo Markets requires a minimum S$3,000 funding for a Classic Account whereas IG and CMC Markets don’t have any minimum funding requirements. In most cases, you’ll have the option of funding your account through GIRO, bank transfer, credit card or debit card.
Step 3: Plan before you buy
Stocks can be a great investment, but they’re also pretty risky. The more companies you hold and the longer you can afford to have money locked into stocks, the less risky your investment is. So it’s important to have a timeline and some actions in mind if things change.
To build a plan, you’ll need to ask yourself the following key questions:
- How much can I afford to invest in stocks?
- How much can I afford to lose?
- How long can my money stay in the stock market?
- What will I do if prices start to fall?
- What about if prices rise?
Once you can answer these questions, you can start mapping out the types of stocks you want to invest in. As a rule of thumb, the riskier the investment, the bigger your potential profit. Work out if you can afford to buy high-risk stocks (such as penny stocks) or if you should stick to safer long-term investments like blue chip stocks or index funds.
Step 4: Pick your stocks
With thousands of stocks to choose from, you’ll need to do some research around which ones match your investment goals. Bear in mind that it’s safer to have a diversified portfolio of stocks from different sectors and even countries to avoid major losses if one market falls.
You’ll often have access to market research, analysis and even stock recommendations through your platform, so use this info to help make an informed decision. The other option is to follow the buy, hold or sell ratings of top brokers such as Morgan Stanley, Goldman Sachs, Morgans, UBS and Morningstar. Just keep in mind that even the experts make wrong investment decisions.
Here are a few tips to help you decide:
- Do you trust the company? The best company to invest in is one that you both understand and trust. Pick a company that you believe will continue growing and can be trusted to use its profits wisely.
- Do you use its products? Are you a fan of Apple or do you use Facebook every day? These could be good options because you’ll also be among the first to notice if the company starts underdelivering to customers.
- Debt + profit levels. Are debt levels under control and is profit growth meeting exceptions?
- Expansion. Does the company have plans to expand into new global markets or sectors? A growing company usually means a rising share price.
- Dividends. Does the company pay a dividend? If not, are you expecting the company’s stock price to rise?
- Stock price. Is the stock overvalued? An expensive stock is where the share price has risen beyond its perceived value, which could mean it’s going to fall in the near future.
Ask an expert: How do you pick the right stocks?
Roger Montgomery
CIO, Montgomery Investment Management
Only invest in quality companies. To identify a quality company search for a sustainably high rate of return on equity. High rates of returns on equity drive better long term returns for investors in those companies. A company that can sustain such returns usually has a sustainable competitive advantage.
Look for sustainable competitive advantages from a great reputation, geographic location, benefits from scale, technology, Patents, innovation or IP, the Network Effect or barriers to entry. Always remember the most valuable competitive advantage is the ability to raise prices without a detrimental impact on unit sales value.
Ask an expert: How do you pick the right stocks?
Eleanor Creagh
Senior Market Strategist, Saxo Markets Australia
Do your own research (financial health, earnings, quality, potential growth etc.), believe in the business yourself and don’t buy a stock because someone gave you a hot tip.
Stick to your investment plan and risk manage – cut losers and allocate that capital elsewhere and let winners run.
Lastly, focus on building a balanced, diversified portfolio that can weather the economic cycle, over picking the next winning stock. No one is right all of the time! The power of consistency and compounding returns (compound interest – the 8th wonder of the world according to Einstein) over a long period of time is far greater than a get rich quick stock pick.
Step 5: Order the stocks
Once you’ve decided which stocks you want to buy and how much you want to spend, the next step is to order them. If you have a full-service broker, you’ll need to call or email them to place your trade. If you’re using an online broker, this part’s up to you.
Remember, larger purchases may incur higher fees. For example, your platform may charge the minimum $25 brokerage fee when you purchase a smaller number of stocks, but the fee structure will change to 0.1% of the trade value when larger amounts are purchased.
- Select your stocks by entering the company name or stock code
- Enter the number of stocks you’d like to buy or the amount you’d like to invest
- Choose your order type – you can usually opt to buy at the current price or use a limit order to pick a better price
- Review and confirm purchase
There are a few different ways that you can order your stocks, ranging from simple to quite complex instructions. The names tend to differ between brokers and not all offer the full range of options, but these are some of the more common types:
Market order. This is the most basic order type, where you buy or sell stocks as soon as possible at the most current available price.
Limit and stop orders. This allows you to buy or sell stocks depending on a specific price. For example, if Singtel’s share price is $2.50 but you want to buy at $2.30, you can set a limit order to execute once its price falls to $2.30 or lower (see example below). You can also set a ‘stop loss’ to minimise losses by selling if a stock price falls below your buying price.
Trailing stop order. This is a type of limit order where the limit is based on a percentage change or a price difference from the market price. This designed to protect profits by enabling a position to remain open so long as the price is moving in the right direction, but close the trade when the instrument’s price changes direction by a specified number of pips. For example, an instrument has a price of $50 and you’d like to buy it for around $40, but only if it’s price dips temporarily rather than indefinitely. You could set a trailing price trigger of $40 with a stop value of 5%. This means your order would be triggered once the price of the instrument falls to $40 and then placed only once it rises by 5% to $42.
IG share trading – limit order example.
Once you’ve entered all the specifics of your transaction, you’ll then get a chance to review the details before placing your buy order. If you place a conditional order (a non-market order), you’ll typically receive a notification by email or text message once the order has been carried out.
What are bid, offer and last prices?
Some brokers display the ‘bid’, ‘offer’ (or ask) and ‘last’ price of stocks. Think of these as similar to auction prices, where buyers and sellers are offering their best prices.
A bid price is the highest price any trader is offering to buy a company’s stock at that moment and the ask or offer price is the lowest price any seller is willing to accept. The last price is the most current price – and also the last price bidders agreed upon.
Although the last price is the stock’s most recent price, it’s not necessarily what you can expect to pay if you make a market order. Instead, you’ll be paying the latest bid price and you’ll get the ask price when you sell.
Step 6: Pay for your stocks
The funds needed to pay for your stocks will automatically be charged from the linked cash account that you selected in step 2. In most cases, you can fund your account using a bank transfer, GIRO, credit card or debit card.
If you’re using an online broker, you’ll need to have sufficient funds to cover the cost of any trade transactions you make, including fees that apply. The trade settlement period on the SGX is two business days (commonly referred to as T+2), which means your account will be charged two days after you’ve bought the stocks.
If you don’t have enough funds in your account by the time you’re charged, it results in the force-selling of your stocks.
Next steps – Monitor the performance of your stocks
Congratulations, you’ve bought some stocks! If you’ve bought shares from SGX, you can log on to your CDP account to check your holdings.
Keeping your investment plan in mind, the next step will be to monitor the performance of your stocks. How often you do this will depend on your plan. For example, if you have a long-term investment strategy, you may only need to check in every few months. If you have a short or medium-term strategy, it may be a good idea to check each night or each week.
Do I need to pay taxes on dividends?
There is no capital gains tax in Singapore.
Singapore operates on a single-tier corporate tax system, in which the profit tax submitted by a company is not charged to the shareholders. As such, most dividend income and gains derived from the sales of stocks, properties and intangible assets will not be taxable.
How much does it cost to buy stocks?
Share prices range from less than one cent to thousands of dollars per stock; however, there are some rules around how much you need to invest.
Minimum investment
In Singapore, the minimum investment for every new SGX company you invest in is 100 stocks (minimum lot size). So if Singapore Airlines (SIA) has a share price of $4.24, you’d need to buy at least 100 stocks of SIA stock ($424) if it’s your first time buying.
These rules change depending on which country a stock is from. For example, you can invest as little as a few cents into US stocks, even if it’s your first time buying. Some brokers also allow fractional investing where you can buy in fractions rather than whole stocks. So say Facebook is priced at US$200 a share, instead of investing US$200, you could buy one-tenth of a share for US$20.
Fees
These are the four main types of fees you may need to pay when you invest in stocks:
- CDP clearing fee. CDP charges a clearing fee of 0.0325% of your contract value.
- SGX trading fee. A trading fee of 0.0075% will be levied on each contract value.
- SGX settlement fee. SGX imposes a Settlement Instruction (SI) fee of $0.35 (or equivalent in foreign currency) for every contract that settles through its settlement system.
- Commission and other fees. Minimum commission fees range around $10 to $25 on most stock trading platforms, and anywhere from $50-$150 for full-service brokers. Depending on the brokerage and market you’re trading in, there may be other miscellaneous fees to look out for, such as currency conversion fee (for foreign stocks), account fees, custody fees (for US stocks) and inactivity fees.
Will your profits cover the fees?
Say you invest $1,000 in Company A stock with a broker fee of $25 a trade. Assuming that you bought no other stocks, you would need to pay a total of $25.75 in fees ($25 commission + $0.325 CDP clearing + $0.075 SGX trading fee + $0.35 SGX settlement fee).
To cover the fees, you’ll need Company A’s stock price to rise by at least 2.575%. But if you’d invested $5,000, you’d only need its price to rise by 0.547%.
Stock trading risks
Before you start buying and selling stocks, make sure you’re well aware of the risks:
- You can lose money. A company’s stock can plummet to zero in the worst case scenario. If you’ve invested in such a company, you could lose your entire investment.
- Bankruptcy. Shareholders are usually the last to be paid when a company goes broke. When this happens, there’s a good chance that you won’t get your money back.
- Emotional toll. Daily stock market fluctuations can cause plenty of stress for investors. If you can’t handle the ups and downs, you may be better off looking for a safer and steadier investment option.
- Unexpected problems. Even if you conduct a lot of research into a company, it’s simply not possible to predict the future. Natural disasters, terrorist attacks, negative company news and even changes in government policy can all occur unexpectedly and adversely affect the price of stocks.
- Lack of expertise. While investing in the stock market sounds quite easy in theory, it can get quite complicated if you don’t know what you’re doing. First-time investors should be wary of getting ahead of themselves.
- Getting in over your head. A final word of warning if you’re thinking of investing in stocks: never bite off more than you can chew. Make sure to use your common sense and take a cautious approach – this applies to any type of investment, be it stocks, property or anything that’ll put your money at risk.
Frequently asked questions about buying stocks in Singapore
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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