Investing in stocks can be a great way to grow your wealth over time, and Singapore offers a robust and well-regulated market for both novice and experienced investors. If you are considering taking a dive into the stock market, here is a step-by-step guide to help you get started.
1. Understand the Basics of Stock Investing
Before diving into the stock market, it's vital to understand the fundamentals of stock investing. Stocks, also known as shares or equities, represent ownership in a company. When you buy a stock, you become a shareholder with voting rights and own a part of that company with limited liability. Stocks are traded on stock exchanges, such as the Singapore Exchange (SGX).
Key concepts
Market Orders and Limit Orders: Market orders buy or sell immediately at the current market price, while limit orders buy or sell at a specific price
Dividends: Payments made by a company to its shareholders from some of its profits either quarterly, semi-annually, or annually
Capital Gains: Profits made from selling a stock at a higher price than you bought it
Capital Loss: If you sold your shares at a price lower than what you bought it for
Stock Indices: Examples include the Straits Times Index (STI), which tracks the performance of the top 30 of the largest capitalised, most actively traded stocks listed on SGX
2. Set Your Investment Goals
Determine why you want to invest in stocks. Are you looking for long-term growth, regular income through dividends, or both? Your investment goals will influence your strategy and the types of stocks you choose.
3. Create a Budget
Decide how much money you are willing to invest. It's important to only invest money that you can afford to lose, as the stock market can be volatile. A common tip is to allocate no more than 10-15% of your portfolio to individual stocks if you are new to investing.
4. Open a CDP & Brokerage Account
To buy and sell stocks, you will need to open a Central Depository (CDP) and trading account. In Singapore, several brokerage firms offer services to retail investors. Compare fees, trading platforms, research tools, and minimum funding requirement before choosing a broker. Some popular ones include:
DBS Vickers
iFast
Maybank Securities
Moomoo
OCBC Securities
Saxo
UOB Kay Hian
Webull
After which, you would need to transfer money to your account usually either via FAST transfer via internet banking, paynow or overseas remittance. You can also use funds from your Supplementary Retirement Scheme (SRS) account. Brokers can help you to execute trade and answer your queries too, otherwise you can execute your own trades via the online trading platform.
5. Learn to Analyse Stocks
Effective stock investing involves analysing companies to determine their value and potential for growth. There are two main types:
Fundamental Analysis: Evaluating a company's financial statements, management, competitive advantages, and market position. More for mid to long term investment horizon.
Technical Analysis: Analysing statistical trends from trading activity, such as price movement and volume. More for shorter term investment horizon.
Keep yourself updated with the latest market news and trends. Follow financial news websites, subscribe to investment newsletters, and participate in investment seminars. Staying informed will help you make better investment decisions.
6. Diversify Your Portfolio
Diversification helps mitigate risk by spreading your investments across different sectors and asset classes. Don't put all your money into one stock or sector. Consider investing in a mix of stocks, bonds, and other assets. You can easily invest in more than one company with only a minimum of 100 shares each.
As a beginner, it's wise to start with a small investment and gradually increase your exposure as you gain confidence and experience. Consider starting with blue-chip stocks, which are shares of well-established companies with a history of reliable performance. If you are not comfortable in stock-picking, consider Exchange Traded Funds (ETFs) or Real Estate Investment Trusts (REITs).
Blue-chip stocks
These are shares in established companies with robust growth which may have lower returns but often pay dividends and have a more stable outlook. Singaporeans will recognise many of these names from CapitaLand, DBS, SIA, Singtel, Sheng Siong and others. Do remember that no company is immune to market volatility or crisis. That is why you should keep your eggs spread across various baskets.
Keep a lookout for the price of the stock you are buying at and how many units of it. If you are buying a certain company stock at $10 each for example, then 100 shares would cost you $1,000 before fees). Check your CDP account to see all your consolidated Singapore securities purchases in one place, even if you have used different brokerage accounts to make purchases. For dividends, it will be credited to the bank account linked to your CDP.
Regular savings plan (RSP)
These are investments of fixed amount of funds monthly into a unit trust of your choice. From $100, you can choose from plans with banks, brokerage firms, and robo-advisors to execute your dollar cost averaging (DCA) strategy. With the same investment amount monthly, you buy more units of the same asset when prices are low, and less when prices are high. This will average out the price of the asset that you are purchasing.
Some options are
a. DBS Invest-Saver
b. OCBC Blue Chip Investment Plan
c. POEMS Share Builders Plan
Nevertheless, more regular transactions could mean more costs eating into your returns so do check the fixed transaction costs when choosing your RSP provider.
ETFs
These are pooled investment instruments which offer diversification through having a basket of stocks from a range of business sectors. Being traded on the open market also makes them more liquid as investors can buy and sell anytime.
Common categories
a. By country or market – eg. STI, S&P 500, etc
b. By market cap size – eg. large, mid and small cap
c. By type of assets – eg. bonds, commodities, dividend yielding, etc
For those with lower budget, purchasing a single ETF could be a start. Eg. the STI ETF ranges around $3.4 while a single stock like SIA is around $6.80 as of 8 June 2024.
REITs
These offer a means to investment in the property market through professionally managed collective investment schemes that own and invest in assets which generate income (usually through rental) from office buildings, shopping malls and hotels etc.
They are regulated and mandated to return at least 90% of their taxable income as dividends, but not all REITs are created equally. Understanding the type of properties involved such as commercial, industrial, healthcare, hospitality, retail, residential or data centres is vital for your assessment.
You can buy them through SGX after evaluating if the Distribution-per-Unit (DPU) – the actual amount paid out per share is increasing yearly. Look out for the Net Property Income (NPI) which is a measure of profitability too. Other factors include a reputable sponsor, stable occupancy rates, geographical diversification, market cap and yield.
Popular options are CapitaLand Ascendas REIT, CapitaLand Integrated Commercial Trust, Frasers Centrepoint Trust, Mapletree Industrial Trust and Keppel DC REIT.
7. Monitor and Adjust Your Portfolio
Regularly review your investment portfolio to ensure it aligns with your goals. Rebalance your portfolio as needed to maintain your desired asset allocation. This might involve selling some investments and buying others.
If you are unsure about making investment decisions on your own, consider speaking to professional brokers. They can provide personalised advice based on your financial situation and goals.
Investing in stocks can be a rewarding journey if approached with knowledge and caution. By understanding the basics, setting clear goals, creating a budget, choosing the right broker, and staying informed, you can build a successful investment strategy in the Singapore stock market. Remember, the key to successful investing is patience and continuous learning. Happy investing!
This article provides a guide and does not constitute financial advice. You should get professional help when needed.
Invest and Grow Your Money Wisely,
Value Vaulter
Comments