How to Buy Stocks in Singapore for Beginners

Investing in the Singapore stock market offers an opportunity to participate in a stable economy. The Singapore Exchange (SGX) provides access to diverse companies, offering exposure to growing markets. This guide outlines the fundamental steps for beginners to buy stocks in Singapore, helping individuals diversify portfolios and potentially benefit from consistent dividend payouts.

Essential Accounts for Trading

To trade stocks in Singapore, you must open both a Central Depository (CDP) account and a brokerage account. These foundational accounts work in tandem to facilitate your stock market activities.

A Central Depository (CDP) account is mandatory for holding SGX-listed shares, establishing you as the legal owner with direct shareholder entitlements like voting rights and invitations to annual general meetings. To open a CDP account, you must be at least 18 years old and not an undischarged bankrupt. You also need an existing bank account with a designated Singapore bank to facilitate the Direct Crediting Service (DCS) for receiving dividends.

The CDP account application can be completed online through the SGX website. Singapore citizens and permanent residents can use MyInfo via SingPass for an expedited process, typically taking five business days. Other nationalities apply using an online form, requiring supporting documents such as a passport, proof of address, a scanned signature, and your Tax Identification Number. This method generally takes ten business days. Many brokerage firms can also assist with the CDP account application when you open a trading account with them.

Alongside your CDP account, a brokerage account is equally important as it serves as the platform to execute buy and sell orders. There are two primary types: CDP-linked accounts and custodian accounts. With a CDP-linked account, trades settle directly into your personal CDP account, meaning you directly own the shares. A custodian account holds your shares under the brokerage’s name in a nominee account, with the brokerage acting as a custodian on your behalf.

CDP-linked accounts offer direct ownership and consolidated viewing of all your SGX investments from different brokers. Custodian accounts might sometimes feature lower commission fees. Both account types require similar eligibility criteria to the CDP account, including being at least 18 years old and not an undischarged bankrupt. The choice between a CDP-linked and a custodian account often depends on individual preferences for ownership structure and trading costs.

Funding Your Trading Account

Once your CDP and brokerage accounts are open, deposit funds into your brokerage account to prepare for trading. Brokerage firms offer various transfer methods, including electronic fund transfers like FAST and PayNow, traditional bank transfers, and cheque deposits.

Electronic transfers like FAST and PayNow offer rapid processing, often reflecting funds within minutes or hours during business days. Bank transfers typically take one to two business days. Cheque deposits have the longest processing period, requiring several business days for clearance.

Most brokerage firms do not charge deposit fees, but your originating bank might. Confirm any potential charges with your bank before initiating a transfer. Ensure funds have cleared and are available before placing stock purchase orders.

Executing Your First Stock Trade

With your accounts established and funded, you are ready to execute your first stock trade. Log into your brokerage platform and search for the desired stock by ticker symbol or company name.

After selecting the stock, specify your purchase order details and choose an order type. A “market order” instructs your brokerage to buy immediately at the best available price, prioritizing speed. In volatile or less liquid markets, the executed price might differ slightly from the displayed price, a phenomenon known as slippage.

Alternatively, a “limit order” lets you set a maximum price you are willing to pay. Your order executes only if the stock’s price reaches or falls below your specified limit. This provides greater control over the purchase price but does not guarantee execution. Limit orders are often preferred for volatile stocks or when you aim to acquire shares at a specific valuation.

Specify the quantity of shares to purchase. SGX stocks are primarily traded in “board lots” of 100 units, so order quantities should be in multiples of 100 shares. Select your order’s “validity”: a “Day Order” expires at the end of the trading day if unfilled, while a “Good-Till-Canceled” (GTC) order remains active for a specified period, often up to 30 days. Review the summary before submitting your order, then monitor its status on the platform.

Understanding Trading Costs and Market Specifics

Stock trading in Singapore involves various costs and market conventions. Understanding these elements is important for managing investment expenses and navigating the trading environment.

Several fees are incurred when buying stocks on the Singapore Exchange (SGX). Brokerage commissions vary, often with a minimum (e.g., S$12 to S$40 for CDP-linked accounts) or a percentage of the trade value (e.g., 0.03% to 0.28%), whichever is higher. In addition to brokerage fees, a Central Depository (CDP) clearing fee of 0.0325% of the traded value and an SGX trading fee of 0.0075% of the traded value are levied.

Goods and Services Tax (GST) is applied to these fees at the current rate of 9%. An SGX settlement fee of S$0.35 per contract may also apply. Transactions involving foreign currencies, such as buying foreign-listed stocks, might incur additional foreign exchange conversion fees.

Beyond costs, be aware of SGX market specifics. Regular trading hours are Monday to Friday, from 09:00 AM to 12:00 PM and 13:00 PM to 17:00 PM Singapore Time (SGT), with a one-hour lunch break. The Singapore stock market operates on a T+2 settlement cycle, meaning trades settle two business days after the transaction date. Stocks on the SGX are typically traded in “board lots” of 100 shares, so orders must be in multiples of this quantity.