Step 1: Open your first brokerage account
You need a brokerage account to buy/sell stocks in the Singapore stock market. The good news is that account opening is free and there is no maintenance fee whatsoever if you choose not to use the account. It is not a savings account, thus, not a must to deposit money, or min balance, However, some brokers may require you to place a deposit from S$1,000 to S$5,000 to facilitate payment of shares.
To open one, you can ask your friends to recommend a stock broker to you or just go to any brokerage firm with your identity documents and bank account details to apply. f you have a preferred stock broker you must indicate it on the application form. If not, one will be allocated to you randomly.
The processing of your application will take about 2 weeks. You will receive your account number and password separately via snail mail.
You will fill in 3 to 4 forms:
1) Application for opening of trading account
- You buy or sell stocks using this account
2) Application for opening of securities account
- Your stocks are deposited here after you buy them. When you sell your stocks, it will be taken out of this account and delivered to the buying party.
3) Linkage of trading account to securities account
- Just a form to link the two accounts
4) GIRO (optional)
- By far the most convenient way to make payment, receive proceeds or receive dividends from your stocks.
Step 2: Buying your first stock in Singapore
To buy stocks, go to the brokerage firm’s website and login with your account number and password. After logging in, you will see a table similar to this:
Read the table across. For a start, you only need to be concerned with 5 items:
- Counter name,
- BVol,
- Buy,
- Sell,
- SVol.
Take for example, Singtel has BVol 268k, Buy $4.31, Sell $4.32 and SVol 632k
That means you can buy Singtel at $4.31 if you are willing to queue up behind 268K shares. Alternatively, you can buy immediately if you are willing to pay a higher price at $4.32. What difference does $0.01 make? It can be huge.
When you buy 10,000 shares at 4.31, your cost is
10,000 shares x $4.31= $43,100
When you buy 10,000 shares at 4.32, your cost is
10,000 shares x $4.32= $43,200
That’s a difference of $100. The more shares you buy, the greater the difference.
Commission charges
There are 2 tiers to the commission. You pay either a % or a minimum amount, depending on the contract value of your stock. Below is an example of the commission incurred when you buy stocks in Singapore
Base on a percentage (0.28%) of the contract value
Contract value: 10,000 shares x $2.95= $29,500
Commission: $29,500 x 0.28% = $82.60
Based on a minimum charge (S$25)
Contract value: 1,000 shares x $2.94 = $2,940
Commission: $2,940 x 0.28% = $8.23
Since the commission is lower than the minimum charge, you pay S$25 instead.
Step 3: How to choose your first stock
I have always encouraged my clients to put in the time to do research on their own. You can look for bargain stocks by going through the financial statements of the companies posted on the SGX website. In this way, you will learn a lot more about investing than depending on others.
But if you can't spare the time or not confident enough to constantly search for these opportunities, using an advanced stock screener or by following daily news developments and observations.
Step 4: After you buy your stock…
You will receive a contract statement sent by the Central Depository (Pte) Ltd or CDP on behalf of your brokerage firm. CDP is the agency in charge of your securities account where your stock is deposited.
You have to make payment for your stocks on (T + 3) days after your purchase. For e.g. you buy a stock on Monday, you make payment on Thursday.
- Monday (T)
- Tuesday (T+1)
- Wednesday (T+2)
- Thursday (T+3)
T= Transaction day
Only then will the stock be deposited into your securities account under your name.
Step 5: When you sell your stock…
Your stock will be taken out of your securities account and it will be delivered to the buying party’s securities account.
Your sale of stock proceeds will be deposited into your bank account on (T+4) days. For e.g. you sell a stock on Monday, you will receive your money on Friday
- Monday (T)
- Tuesday (T+1)
- Wednesday (T+2)
- Thursday (T+3)
- Friday (T+4)
T= Transaction day
So all in all, it's that straight forward. These are the 5 steps you will be doing, directly and indirectly when you are buying and selling shares.
