Beginner’s Guide to Investing in Singapore Stocks in 2019
You may have heard stories of people who have been making a fortune on the stock market in Singapore. That has probably got you thinking of how you can follow the same path and retire early from your regular day job.
First things first, you need to realize that successful investing in the stock market is not a walk in the park. It takes a lot of patience and understanding of how the market works, as well as a lot of research and analysis of each stock. But worry not because this article will give you a detailed rundown of everything you need to do in order to invest successfully in Singapore stocks in 2019.
CDP and Custodian accounts
There are two ways to approach stock trading in Singapore. They include Central Depository (CDP) accounts and Custodian accounts with each of them offering their advantages and disadvantages.
A CDP account is used to store the shares once purchased and it also grants the buyer full custody. Once you have full ownership of a company’s shares, then you are considered a shareholder with a vested interest in the firm’s performance. Extra benefits f having a CDP account include having timely delivery of the company’s notices, annual reports and circulars.
A custodian account, on the other hand, allows you to trade shares but you don’t have ownership. The shares are instead owned by a stockbroker. The advantage of this approach is that the fees are lower, making it a more affordable option. If you choose the custodian option in Singapore, then UOB Kay Hian is probably your best bet.
You can invest in shares as a retail trader where you buy low and sell high to make a profit or you can purchase shares so that you can earn dividends. The latter usually requires a lot of shares to make decent dividends but both require careful analysis. The idea is to build a portfolio that consists of companies or stocks that perform well and that are well managed.
Select an ideal broker
Whether a beginner or a seasoned trader, having the right broker is always essential in order to access more tools and maximize your earnings. You need to take into account your preferred trading account whether a CDP or a custodian account. Below is a list of Singapore brokers and their brokerage fees.
Overall, DBS Vickers has one of the best offers since it charges an S$10 minimum and its fee is 0.12%. This means that it has the lowest fees out of all the brokers available in Singapore and it allows direct purchases from the CDP account. A Cash Upfront account allows investors to transfer money into their accounts before they execute a trade. It also requires fewer fees and the regular DBS Vickers account features the T+3.
As pointed out earlier, buying stocks requires investors to carry out a careful analysis that often should include evaluating the financial books of the balance sheets of target firms. Determine whether the companies you have listed are managed properly. Also, examine their level of debt and profits.
One of the best ways to pick out winning stocks is to start evaluating from a market perspective. Determine which industries are likely to continue performing well come 2018. For example, firms that produce essential products are always a good bet especially if there is a consistent demand for their products.
The importance of timing in stock trading cannot be stressed enough. If you choose the retail trading path, then you should consider taking advantage of market lows. For example, Singapore stocks have performed poorly in 2018.
Most armature traders lose money when the market crashes, they get emotional and sell at unfavourable prices to avoid further loss. Market crashes also present the best opportunities for traders to buy stocks and ride the bulls when the stock recovers. This is a classic application of the “buy low sell high” principle.
Try to focus on stocks that have traditionally proved themselves as strong performers. Blue-chip stocks are often the best stocks to invest in. Blue chip stocks refer to the shares of major corporations that are already well established. The shares of such companies are ideal investment opportunities especially for those who intend to earn dividends. However, they are often characterized by high share prices making them expensive to purchase. The best approach is to purchase when the market is in a slump.
How to deal with losses
Stock trading is a “win some-lose some” game because the market is sometimes favourable and other times it goes against you. Losses are inevitable but there are strategies to help reduce losses. The surest way is to always be updated on any news that may affect a company’s stock. For example, the Brexit news this year has so far encouraged a bearish stock market performance.
Trade wars between China and numerous other countries have also negatively affected the performance of many Singapore industries. This has, as a result, affected Singapore stocks causing many companies to perform poorly. Being exposed to such information would allow you to execute vital measures such as selling stocks of some companies that might be affected before they tank. The market information also allows you to purchase the stocks at ideal times which is preferably just before they skyrocket.
Profits made when the shares gain should offset the losses which is why beginners should also practice taking only a certain level of profit. The goal is to avoid being greedy or being exposed to too much risk. Investing in the stock market requires investors to practice proper money management techniques that will help them avoid losing money.