How to Start Investing in Stocks in Singapore

Investing in the stock market offers a path to potential financial growth and can be a strategic component of a diversified financial plan. For individuals seeking to expand their investment horizons, the Singapore stock market presents various opportunities. This guide provides an overview of the procedures and considerations for engaging with the Singapore equities market.

Opening a Brokerage Account

Beginning stock investing in Singapore necessitates opening a brokerage account, which serves as the gateway to the market. Several types of brokerage accounts are available, each with distinct features. A Central Depository (CDP)-linked account allows direct ownership of shares listed on the Singapore Exchange (SGX), meaning the shares are held in your name by the CDP. This provides rights such as voting and attending Annual General Meetings (AGMs).

Conversely, a custodian or nominee account means the brokerage firm holds the shares on your behalf. This can offer convenience and sometimes lower commission fees, though direct ownership rights may reside with the custodian. Cash upfront accounts typically require investors to pre-fund their accounts before trading, while others allow for post-trade settlement. Selecting a suitable brokerage firm involves evaluating commission fees, platform usability, available research tools, and customer support.

Regulatory compliance is important; ensure the brokerage is licensed and regulated by the Monetary Authority of Singapore (MAS). The application process involves submitting required documents, which include:
National identity card (NRIC) or passport
Proof of residential address (e.g., utility bill or bank statement issued within the last three months)
Bank statements
For U.S. tax residents, a completed Form W-9

Many brokerages facilitate online applications, often streamlining the process through Singpass for Singapore citizens and permanent residents. While some brokerages integrate CDP account opening, others may require you to open it separately. Individuals must be at least 18 years old and not an undischarged bankrupt to open a CDP account.

Understanding Singapore Stock Market Basics

The Singapore Exchange (SGX) functions as Singapore’s primary stock exchange and a comprehensive financial hub. It provides trading, clearing, settlement, and custody for various financial instruments. The SGX facilitates the trading of equities, fixed income securities, derivatives, commodities, and foreign exchange.

Common investment instruments available on the SGX include:
Common shares, which represent ownership in a company.
Exchange Traded Funds (ETFs), which diversify investments across a basket of securities, often tracking an index.
Real Estate Investment Trusts (REITs), popular in Singapore, providing real estate exposure without direct ownership and typically distributing regular income.
Bonds, which represent loans made to a borrower, offering predictable income streams.

A benchmark for the Singapore stock market is the Straits Times Index (STI). The STI tracks the performance of the top 30 largest and most liquid companies listed on the SGX, serving as a barometer for the country’s economic health and market sentiment. Understanding basic stock market terminology is helpful: “bid price” is the highest price a buyer will pay, “ask price” is the lowest price a seller will accept. “Volume” refers to shares traded over a period, and “market capitalization” indicates a company’s total value based on its share price and outstanding shares.

Placing Stock Trades

Once a brokerage account is established and funded, placing a stock trade involves navigating the brokerage platform. Investors begin by logging into their online trading account. The platform provides a search function to locate a specific stock using its company name or ticker symbol.

After selecting the desired stock, investors choose to buy or sell, then specify the quantity of shares and the order type. Two common order types are market orders and limit orders. A market order is an instruction to buy or sell a stock immediately at the best available current market price, prioritizing execution speed over a specific price. This order type is suitable for highly liquid markets.

In contrast, a limit order allows investors to specify a maximum price they are willing to pay when buying, or a minimum price they will accept when selling. The order executes only if the market reaches or surpasses that specified price. While a limit order guarantees a price, it does not guarantee execution, as the specified price may not be met. After inputting all trade details, a review and confirmation step is provided before the order is placed. Trade settlement in Singapore typically follows a T+2 or T+3 cycle, meaning the transaction finalizes two or three business days after the trade date.

Ongoing Investment Management

Managing investments involves understanding associated costs and tax implications, along with regular monitoring and portfolio adjustments. Various fees are incurred when investing in stocks in Singapore. Brokerage commissions, ranging from 0.03% to 0.28% of the contract value, are charged by the brokerage firm for executing trades. Many brokerages also impose a minimum commission fee per trade, which can range from S$8.80 to S$25 for CDP-linked accounts and S$0 to S$28 for custodian accounts.

Other charges include a CDP clearing fee of 0.0325% of the traded value and an SGX trading fee of 0.0075% of the traded value. An SGX settlement fee of S$0.35 per contract may also apply. Goods and Services Tax (GST), currently at 9%, is levied on commission fees, clearing fees, SGX trading fees, and SGX settlement fees. Custody fees might be charged by brokerages holding shares in nominee accounts, typically as a percentage or flat rate.

For individual investors in Singapore, capital gains from stock trading are not subject to personal income tax. Dividends received from Singapore-listed companies are also tax-exempt for individuals, unless earned through a trade or business. Stock performance can be monitored through brokerage platforms, financial news websites, and investment tracking tools, which often provide real-time price updates and portfolio overviews.

Regularly reviewing and rebalancing an investment portfolio is important. Rebalancing involves realigning the portfolio to its original target asset allocation, which can drift due to market fluctuations. This process helps maintain a desired risk level and can involve selling assets that have grown disproportionately and using proceeds to buy underweight assets. Rebalancing can be done on a fixed schedule, such as quarterly, or when asset allocations deviate beyond a set threshold.