A beginner’s guide to buying and investing in Singapore stocks in 2022 is essential for international stock investments in building a diversified portfolio.
One of the most significant aspects of personal finance is investing. Knowing how to invest and acting on that information can significantly assist a person in rapidly increasing their wealth and generating streams of passive income.
Successful investors are able to retire earlier and pursue their passions without having to worry about running out of money. They may go about their daily lives knowing that their investments will meet their financial demands.
This post is intended to serve as a straightforward guide for novice investors who are unclear where to begin their investing adventure.
If you want to invest as an expat or high-net-worth individual, which is what i specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).
What Am I Able To Invest In
When it comes to investing, the first question most individuals have is what they can invest in. This is a really straightforward question.
Unlike in the past, retail investors in Singapore stocks now have a much wider range of possibilities.
Individual equities, exchange-traded funds (ETFs), Real Estate Investment Trusts (REITs), bonds, and even government-created products such as Singapore Savings Bonds are all options for investors.
Other types of investments, such as unit trusts, property funds, peer-to-peer (P2P) lending, and Robo-advisors, are not included.
Of course, the instrument in which you ultimately decide to invest must be one that you understand and are willing to risk.
Typical Instruments in Investing in Singapore Stocks
When people talk about investment, the most common tool they use is stocks. Investors can choose from more than 700 equities on the Singapore Exchange (SGX). Finding the appropriate companies to invest in, on the other hand, is not as simple.
Stocks cannot be purchased in a store and then transported home in a plastic bag. To purchase and sell stocks, you’ll need to open an account with an investment firm. A brokerage is a firm that works as a go-between for you and the stock exchange.
Trading costs are charged as a percentage of each trade, and certain brokerage accounts may also levy a minimum fee, which is the minimum trading fee you must pay on each trade. These will have an impact on your profits, so compare them.
We recommend SAXO Markets or Phillip Securities if you’re just getting started (POEMS). If you buy equities on the Singapore Exchange, these offer very cheap fees and no minimum commission.
Aside from costs, you might wish to have a look at the broker’s web platform. Because you’ll be investing through that platform, choose a broker with a straightforward and intuitive platform that isn’t buggy if the notion of traversing a complex portal worries you.
In addition, cheaper brokerages, such as the ones listed above, often hold your stocks in a “custodian account” on your behalf. You’ll also need to register a Central Depository Account (CDP) if you want to own Singapore equities in your name. Brokerage fees are likely to be higher.
Choose Which Stocks To Invest In
You must first deposit funds into your account before you can begin trading. You should check with your brokerage to see if there is a minimum financing need, so make sure you have it.
Singapore’s economy is dominated by “blue chips” such as Singtel, DBS, and Keppel. They may not develop as quickly as some foreign companies (think Tesla), but they are typically considered as extremely solid. Many investors hold these stocks for a long time and get the benefits of dividends.
Exchange Traded Funds (ETFs)
If individual equities aren’t your cup of tea, ETFs are a viable option.
Is there anything “safer” than Singtel? The Straits Times Index (STI) ETF and the ABF Singapore Bond Index Fund are two examples of exchange-traded funds. These are mixed goodie packages of various stocks (or bonds or other assets), usually the top X performers. So, if Singtel goes bankrupt, your STI ETF (which tracks Singapore’s top 30 companies) won’t be as badly affected as Singtel stock.
ETFs are similar to mutual funds in that they only aim to achieve one thing: replicate the index or sector they are tracking. Its goal is to achieve the market’s benchmark returns in this way.
Real Estate Investment Trusts (REITs)
Do you want to be a landlord but don’t want to deal with the hassle? REITs such as Mapletree, CapitaLand, and Ascendas allow you to own a portion of a commercial property, such as a shopping mall or an office building. Long-term, the big brands are thought to be virtually failsafe (except for COVID-19), and they tend to give out large dividends.
You can use your broker’s desktop or mobile application to acquire shares once your funds have cleared. Hopefully, you didn’t choose a brokerage with a too complicated platform in Step 1.
We’re not here to tell you how to invest, but if you’ve never done so before and don’t have a lot of money, you might want to start small by investing a certain amount each month in a generic ETF like the STI ETF. Dollar cost averaging is a technique that helps you develop a habit of investing on a regular basis.
Timing the market isn’t necessary if you’re going to adopt the dollar cost averaging strategy. The premise is that the ETF will climb over time, and that by investing a small, fixed amount every month, you’ll spread out your risk over many ups and downs. So you may get in whenever you have the opportunity and make sure you invest a little more every month.
If you have any extra cash, buying a mix of the three types of assets outlined in Step 3 will offer you a pretty stable, “safe” portfolio.
Simply monitor past share prices (available through your brokerage’s platform or simply Google) and keep an eye on the market for bargains.
Real Estate Investment Trusts (REITs) are becoming more popular as an investment class because they are a reasonably easy way for an increasingly savvy population to invest in real estate.
A REIT is a company that holds a portfolio of rental buildings. The rental money is then used to cover the costs of owning the properties, with the remaining profits going to shareholders as dividends.
Financial Bonds
Bonds are debt obligations issued by organizations and businesses.
Simply defined, these companies are borrowing money today with the promise of paying coupons (or interest rates) throughout the duration of the bond’s existence, as well as the principle when the bond matures. They are preferred by investors because they are less volatile and hazardous than equities.
Bonds, unlike stocks, have a set maturity date. Bonds can be purchased for as little as one year or as much as 30 years. Bonds with a shorter maturity period are considered to be less hazardous because there is less time for interest rates to fluctuate or bondholders to have financial issues.
When compared to stocks, homes, or private enterprises, some investors naturally assume that bonds are secure investments.
While this is true in general, it does not mean that bond investments are risk-free. In fact, claiming they are risk-free is a common misunderstanding.
Relax And Enjoy Your Dividends
Rather of looking for businesses with strong growth potential, the Singapore stock market favors passive investors who wish to sit back and collect monthly dividends.
(On the other hand, if you want to buy “growth” stocks like Tesla, Google, and others, you’ll have to do it on an international exchange.) Which is, in fact, rather simple. For additional information, see our guide to buying equities on the US stock market.)
The majority of dividend-paying companies pay out four times a year, or once every quarter. There are some outliers, with certain equities paying dividends anywhere from once a year to twelve times a year.
Some brokerages allow you to reinvest cash dividends automatically. If you do not select this option, the dividends will be paid in cash. You can then decide whether to immediately reinvest the money using the dollar cost averaging method or to keep it until you find good deals on the market.
And… that’s the end of it! Investing passively for the long term isn’t rocket science for the average Joe who just wants to buy and hold some excellent companies.
Of course, there may be more to learn depending on how carefully you wish to manage your portfolio. But, for now, you’ve learned enough to get started. Best of luck!
Pained by financial indecision?
Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.
