So the New Year has dawned on us, and here we are again, thinking of what a fitting New Year’s resolution for 2021 might be. If you’ve dropped your last year’s goal of losing 10 kg for something more realistic like investing in the stock market in Singapore, you’ve come to the right post.
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Investing in stocks is a great way to add another stream of (passive) income to help you reach your goals – whether you’re an expat or a citizen of Singapore.
Thinking of Investing in Stocks in Singapore? Here Are 5 Simple Steps
While there are many methods about getting into the stocks market – some, you might have even heard being promoted by self-styled investment gurus to your kopi tiam friends. Still, unless your ambition is to become a day trader, you don’t need to master complex charting techniques or technical analysis.
That said, there are plenty of low-cost investment brokerages and a wide range of investments to suit any risk appetite out there. So there’s essentially no reason why average people like you and me can’t get started on stock investing. Keep on reading to learn more.
Step 1: Open an investment brokerage account.
Even before online transactions blew up (mainly due to the pandemic), buying stocks has already been operating using this technology. That said, to get into stock investing, you will need to first open an account with an investment brokerage.
A brokerage is a company that acts as a middleman between you and the stock exchange.
Brokerage accounts charge trading fees as a percentage of each trade, and some might also impose a minimum fee, that is, the minimum trading fee you must pay on each trade. These will impact your profits, so it’s always good to do your research and compare which brokerage offers the best terms and lowest fees.
Besides the fees, it’s also worthwhile to preview the broker’s online platform. Since you will be investing through that platform, you need to be able to easily navigate the portal. That said, make sure that your broker’s portal is simple to use and is not buggy at all.
Step 2: Fund your investment brokerage account.
Now that you already have your brokerage account, the next thing you need to do is to transfer money to your account. Take note that your brokerage might have a minimum funding requirement, so you’ll need to make sure that you have the required amount.
If you’re wondering how you’ll be able to fund your brokerage account, here are some of the most common methods:
- FAST transfer via internet banking
- PayNow transfer
- Remittance from overseas, such as with services like TransferWise
Step 3: Choose which stocks to invest in.
After you’ve covered the first two steps, which are the easiest ones, you will now get to do some actual investing. As a beginner, here are the most popular buys that are known for their stability, making them relatively safe bets for beginners.
Blue Chip Stocks
These are considered the “giants” in Singapore’s economy such as Singtel, DBS, and Keppel among many others. They may not explode in terms of growth like certain overseas firms such as Tesla, but are widely regarded as “super stable”. Many investors hang on to these stocks for long periods and collect dividends.
Exchange-Traded Funds (ETFs)
If you’re looking for something that’s even safer than some blue-chip stocks, then consider looking into ETFs. Few good examples of this are the Straits Times Index (STI) ETF and the ABF Singapore Bond Index Fund. These are considered as mixed goodie bags of assorted stocks (or bonds or other assets), typically the top “X” best-performing ones.
Real Estate Investment Trusts (REITs)
Do you dream of becoming a landlord without all the hassle? REITs such as Mapletree, CapitaLand, and Ascendas will give you your ticket to become part-landlord at a variety of commercial properties, such as shopping malls and office buildings.
Step 4: Buy your first shares.
Once your funds have been cleared, you can now start buying shares through your broker’s desktop or mobile platform. As a reminder, do not go with a brokerage that has an overly complex or technical platform.
As for the strategy, that will be for you to decide, but if you’ve never invested before and don’t have wads of cash to burn, then you might want to keep things simple by spending a fixed amount every month on a generic ETF such as the STI ETF. This strategy is known as dollar-cost averaging and helps you make investing a regular habit.
If you’re going to use this technique, then you won’t have to worry so much about the timing. The idea here is that, over the long term, the ETF will rise, and by buying a small, fixed sum every month you’re spreading out your risk through many ups and downs. This makes it easy to jump into stocks investing whenever you can and make sure you are consistent with investing a bit more every month.
However, if you still have a bit more cash, buying a combination of the three types of securities mentioned earlier will give you a fairly stable, “safe” portfolio.
And as a final note: make sure to check historical share prices (obtainable through your brokerage’s platform or even Google) and watch the market for opportunities to buy at a good price.
Step 5: Sit back, relax, and watch your dividends grow!
And finally – the best part: sit back, relax, and collect regular dividends, rather than search for stocks with high growth potential.
When we say relax, that doesn’t mean you’ll sleep on your investment. Do note that most dividend-yielding stocks payout 4 times a year, i.e. every quarter. There are some exceptions, however, with certain stocks dishing out dividends anywhere from 1 to 12 times a year.
Also, some brokerages provide you with the option to automatically reinvest cash dividends. If you don’t pick this option, you will receive the dividends in cash. You can then choose to either promptly reinvest the cash in line with the dollar cost averaging technique, or hold onto it until you find good deals on the market.
The beauty in stock investing is that you don’t need to put in a lot of work; you just have to try to make the best choices at the moment and to read, read, read so that you can get a better understanding of which products are worth investing in.
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