Before we dive right in to the fundamentals, technicals and psychological side of investing, I would like to dedicate a couple of entries to help readers who have limited understanding on how to get started on investing. I feel that it is only right to start off from the very basic. I know that one can easily Google about how to get around doing it, but when I first started out I really wish someone could have been there to compile and water down necessary informations to make things easier and digestible. So, this is also dedicated for the 20 years old me.
Also, I understand that many of the readers here have already had some sort of experiences in investing, so you guys might want to skip this post! I would rather be straight up about it than take up your time, for time is precious right?
GETTING STARTED 101: OPENING A STOCK TRADING ACCOUNT
First of all, to get started in investing you will inevitably need a stock trading account!! I would highly recommend anyone who doesn’t have a stock trading account to open one now. It cost you nothing, except a few minutes to fill up the applications form and to get your hands on the necessary documents. It will be wise to have it ready before getting started on anything else.
Set up ASAP so when you need it, it’s ready.
Here, I have come out with a list of things to consider when opening a stock trading account:
- Commission Rates
- CDP Securities Account or Custodian Account
- Trading Platform
- Convenience & Accessibility
OPENING A STOCK TRADING ACCOUNT: AGE
Are you at least 21 years old or are you in the range of 18 – 20 years old? If you are at least 21 years old, opening an account is made much easier for that is the standard egilibilty age to open a stock trading account with most, if not all, major brokerage firms.
However, if you are in the range of 18 – 20 years old, opening an account is made trickier but not impossible as not all brokerage firms are able to offer you a stock trading account. My first trading account was with CIMB Securities (this is not a sponsored entry, but in the future it can be. HAHAHA! Not sorry, but I’m an opportunist.). Signing up as a youth investor would usually require a minimum sum of deposit, $500 in the case of CIMB Securities.
A quick Google search reflects that OCBC, DBS Vickers and UOB Kay Hian are a few others major brokerage firm that provides stock trading account to minor. So, how do you choose which brokerage firm to open an account with? In my opinion your decision should be based upon (1) Comission Rates, (2) CDP Securities Account or Custodian Account, (3) Trading Platform and (4) Convenience & Accessibility.
CHOOSING YOUR BROKERAGE FIRM: COMISSION RATES
Commission rates differ amongst brokerage firms. A minimum fees is incurred for every trade that you take, irregardless of the value of the trade contract. Also, trading fees from your brokerage firmthat is based upon on the contract amount (+ SGX clearing fees of 0.0325% & SGX trading access fee of 0.0075% for CDP Securities Account). A total of four different fees you will need to pay. Hence, it is advisable to work out the amount you need to enter and exit a trade before entering the trade.
(Comparison table retrieved from: https://blog.seedly.sg/the-ultimate-cheatsheet-cheapest-stock-brokerage-in-singapore/ )
Assuming BuibuiFA purchased 2 mini lots (200 shares) with a contract value of $500, the fees paid will amount to a significant percentage, >10% of her contract value.
So, here’s a few questions to ponder about:
(1) Will it be worth it to enter the trade which is going to take her back -10% upon entry?
(2) How long will it take for her to breakeven?
(3) What is the expected profit from the trade? Will the time taken be justifiable?
Also, it is cheaper to trade online(advisable), by yourself on the trading platform, than through a broker. Hence, do take the time to learn how to execute trades, it is very much doable and it will save you money! (Not to worry, I’ll teach you how in my future entries. Pinky promise!)
CHOOSING YOUR BROKERAGE FIRM: CDP OR CUSTODIAN ACCOUNT
Wait a minute! Shouldn’t we just open an account with Standard Chartered or SAXO Capital Markets since their fees are significantly lower than other brokerage firms? No, not necessarily. Let me show you some of the differences with the following comparison table I’ve came out with:
The decision is yours to make for it will all boils down to your needs and level of comfort.
Things to note: If you are opening your first ever trading account, you can apply to open your CDP Securities Account together with the intended brokerage firm. It usually comes together with the application forms.
CHOOSING YOUR BROKERAGE FIRM: TRADING PLATFORM
Trading platform differs amongst brokerage firms. Some provide features that others may not and some may not be as user friendly as another. Do you like the charts they provide? Does it suits you? Are they equipped with charting instruments or technical indicators that you might want to use? How informative are their research report? Is navigating around the platform easy? These are some questions that you might want to ask yourself when choosing a broker. Personally, what appeals more to me are platforms that allow me to navigate around effortlessly and the charting instruments they are equipped with. Again, it’s pretty much dependable on individuals’ preferences.
CHOOSING YOUR BROKERAGE FIRM: CONVENIENCE & ACCESSIBILITY
Convenience and accessibility are of significant importance. It is necessary to have easy access and be able to trade anywhere without any hassle.
Things to look out for:
- Does it support mobile trading platform
- Does it support your mobile platform (iOS / Android)
- Efficiency of call service centre
- Overall efficiency of platform
I understand that it might be quite a challenge to unravel the efficiency of it all but don’t worry too much about it for one can always easily open a trading account with another brokerage firm if the initial isn’t to your liking. However, it is always good to DYODD (do your own due diligence) of the broker you are interested in to save yourself some time and hassle.
– Valerie Choo