How to Open a CDP Account
Starting to invest in Singapore is a very good idea, especially, for a beginner who is looking to invest in a safe, stable and diversified market. But the first few steps can be terrifying, especially if you have no experience in working with all the different kinds of accounts or don’t have any financial education. However, if you take it to step by step, you will get the hang of it and become a master in no time. There are a few simple tips to apply to make your way into the investment world in Singapore in 2018.
A tip for a beginner is to read a lot before they actually commit to becoming an investor, even if they’re a Singaporean or not. At first, all will look so complicated and can become overwhelming, especially, if you are young and impatient about investing your money. Read about investors, the firms to invest in, the best investment in 2018, the types of popular investments in Singapore and Asia, and everything else that will make you feel comfortable in taking the next steps.
If you have already done your research, you can start your journey. Opening a brokerage account will be your first step as a beginner, so you will have to continue your research for finding a good firm that will help you continue your new journey and open an account with the best possible terms.
Part of your first step is opening a CDP account that you will need for as long as you will be an investor. Probably, many questions arise when hearing about a CDP account for the first step, so let’s clear the air and find out what is CDP account and how to open it.
What is a CDP account?
A CDP account is an account you open with “Central Depository of the Singapore Stock Exchange” and it will keep together all the stocks you have bought. It acts like a personal safe that you use to keep all your stocks. Plus, when you open a CDP account, it will also come with other services, such as lending, borrowing, deposit, transfer, withdrawal, etc.
How does a CDP account work?
Ok, we already know what a CDP account is, but the question is how does it actually work? As said earlier, all the stocks you buy will be deposited in your CDP account. And, these stocks being exchanged for cash, the cash is deducted from the bank account linked to the CDP account. Also, when you sell stocks, they will be removed from your CDP account and the cash will be deposited in the same bank account.
Why would I need a CDP account?
When you start investing in stocks, you will need some sort of account that can help you keep track of the stocks you trade. A CDP account helps you with that. There are other options for a beginner investor in Singapore, such as a nominee account which is usually an option if you are trading through a brokerage firm. However, the CDP accounts are very popular because they are the cheapest and offer almost the same services that you can avail with other similar accounts.
How do I open a CDP account?
In order to open your CDP account, you will need to:
- Be over 18 years of age
- Not be the un-discharged bankrupt
- Open a bank account in a Singapore bank
- Complete the application form that you will find on the SGX website – complete the details on the computer, print and sign it
- Have a photocopy of your passport if you are a foreigner or your NRIC if you are a Singaporean
- Include one of these original documents (dated within 3 months):
- Bank statement
- CPF statement
- The last assessment notice for income tax
- Mail the application form with the rest of the documents or drop it off at “CDP – The Central Depository Limited”.
Can the brokerage firm help you?
As you noticed before, opening a CDP account comes second after opening a brokerage account. So, you could also get help from the brokerage firm you chose to work with for your brokerage account. You can sit down with them and discuss the possibility to open an account through them. They can also help you with filling in the application and submitting it to you. This will certainly help you spare yourself some time.
Once you’ve followed all the steps and submitted the CDP application, the process is completed and you will be notified by post with all the login information you need in a maximum of 10 business days.
Start using the CDP account
You succeeded; you opened a CDP account, so what now? You will start using your account. The first natural step should be to link your CDP account with the brokerage account you already have. You can ask your broker to offer all the support you need and the platform that can be used for trading. You should know that you don’t have to pay anything for opening your CDP account but there can be extra sums to pay, such as administrative/trading fees for your broker.
The CDP account can be used to buy/sell stocks, the Singapore Saving Bonds (SSB) and various other securities. Also, you will be able to attend AGMs and vote for the companies you hold shares from. Plus, you will be able to buy shares at the fixed price and participate in “Dividend Reinvestment Programs”.
There you go, from now on you are officially an investor that can start his investing career. The CDP account is your first step to a career in the investment world. As a beginner, do not take a leap and invest all your sum in stock, rather keep it small, make a starting plan and set your objectives for the first few months or even for the first year. Read a lot, grow, and let your CDP account to grow with you – with many good stocks bought & sold.
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