Getting started in
shares investments in Singapore is fairly easy, and there is a list of
different brokers to choose from depending on one's needs. Generally, the
stockbroking industry has largely become a commoditized business, whereby the
main differentiation lies mainly in the brokerage cost. While one may argue on
the level of services provided by individual dealers or remisiers (trading
representative), this is unknown to new investors / customers, who usually sign
up for their accounts through walk-ins, online, or seminars organized by
stockbroking companies. Also, at the end of the day when it comes to
investments it is every dollar that goes into our pocket that counts, so why
should we benefit the brokers at our own expense?For beginners, below is a list of brokers available in Singapore for your consideration. While brokerage cost is definitely one key factor, you may also want to keep your considerations along the line of ease of access to the broker as well as other factors that may be relevant to you personally.
To get started, a new
investor should have an idea about the concept of buying and selling shares. In
Singapore, share ownerships are kept under one's name with the Central
Depository Pte Ltd (CDP), the clearing house that provides integrated clearing,
settlement and depository facilities for the securities market. Essentially,
the CDP account is one account that is linked to the trading account(s) that an
investor opens with different brokers. What this means is that the investor may
buy shares through Broker A and sell the same shares through Broker B,
therefore not restricting him / her to the use of single stockbroking company
or broker only. This compares
differently to some of the central depository functions in other countries like
the CDS in Malaysia, where an investor can have many CDS account numbers and
can only buy and sell the same shares through the same broker.
In general, the
Singapore share market offers the following instruments for trading /
investment purposes:
1. Shares
Shares
/ listed shares are essentially an ownership in a listed company that trades on
the exchange, which gives owner a proportionate share of entitlements to the
profit or loss of a company, as well as any increase or decrease in the value
of a company.
2. Warrants
Warrants may be issued by a listed company or
investment bank. It is essentially an option granted by the issuer to purchase
shares in a listed company at a designated price and within a designated
period. Warrants are leveraged investments and are often of higher risk than
purchasing the underlying shares in a company.
3. Exchange-traded
funds (ETF)
ETFs are investment funds that track the
performance of an underlying market index. It is generally used as a tool to
gauge the return of the overall market that the fund tracks.
4. American
Depository Receipts (ADRs)
ADRs are negotiable certificates issued by a US
Bank representing a specified number of shares in a foreign company that trades
on the US exchange.
5. Extended
Settlement Contracts (ES)
ES is a contract between two parties to buy or sell
a fixed quantity of shares at a specific time at a pre-determined price. It
essentially functions like futures contracts and it generally known as
Single-stock futures as it applies to shares of listed companies. An ES is also
a form of leveraged investment.
6. Real
Estate Investment Trusts (REITs)
REITs are shares of a property investment company
that owns a portfolio of assets of commercial, industrial, or other similar
natures. REITs generally give out quarterly payout akin to rental payment and
are generally classified as income investments.
Having understand the
concept of share ownership and the type of tradable products on the Singapore
exchange, next to note is that the buying and selling of shares nowadays are
mostly carried out using internet or mobile trading platforms provided by the brokers.
While broker-assisted placement of orders through phone calls or SMS or any
other form of verbal or written communications is still the preferred method by
many older generation investors, young and tech-savvy investors are largely
adopting the internet or even the mobile trading versions of buying and selling
shares. Most trading platforms today are easy to use and user-friendly, and the
level of security is also enhanced through 2-factor authentication. Therefore,
it is envisioned that such trend shall continue going forward and brokers are
also investing more into developing more sophisticated trading platforms to
cater for increasingly complex and multi-functional usages.
Next, after an
investor has bought into shares of a company, he may be entitled to certain
corporate actions such as, dividends, bonus issues, rights issues, etc.
Dividend entitlements are usually issued to an owner of shares in the form of
cheque, whereas bonus issues and rights issues are often notified to
shareholders through subscription / entitlement documents. Another form of
entitlement of dividend entitlement that is commonly found in Singapore is
scrip dividend, whereby shareholder may opt to receive shares issued at a
designated price by the company in lieu of the cash dividends entitled. For
details on qualifying for such corporate actions , you may consult your broker
and this is where the service of the broker comes in.
Finally, before you
decide whether to buy into the shares of a company, remember that any form of
investment carries a certain level of risk. An investment may appreciate or
depreciate in value, therefore resulting in unpredictable change in the return
on or loss of capital. Also, there may
be liquidity risk as well where a buyer of shares may not be able to sell the
same shares at the price or quantity that he / she intends due to lack of
liquidity or market depth. Other factors such as general market condition,
state of economy, changing industry landscape, as well as political factors
also affect performance of share prices. In order to ensure that one carefully
understands the investments that he/ she is going to make, it is therefore
important to understand the analytical methods / tools available for performing
necessary analysis or studies. We will continue with the topic of analyzing
companies and shares in the next posting, so stay tuned.
Any SGX stock picks for 2015?
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