Navigating the stock
market
Want to make your money grow but don't know
how? CHAI HUNG YIN speaks to experts
To start investing in the stock market, you need to open
two accounts - a Central Depository (COP) securities account and a
brokerage account.
You must be at least 18-years-old and must not be an
undischarged bankrupt. Novice investors may not know which of the
12 brokerage firms in Singapore - many offering online and mobile
trading platforms - they should pick. These are the criteria to
look out for:
COMMISSION RATE
While the commission fees charged by brokerage firms are largely
similar, there are exceptions. (See chart on right.)
Other transaction charges per trade include clearing fees
imposed by CDP of 0.0325 per cent, SGX trading access fee of 0.0075
per cent and 7 per cent of goods and services tax (GST) on the
total charge.
Most firms here also charge a minimum fee for each trade, except
for Standard Chartered Singapore.
"Commission cost is always based on the notional
transaction amount.
"For the same percentage commission, the absolute
value will seem large for a small notional amount, but for a larger
amount, it will be insignificant," says Mr Raymond Chin, head of
e-broking at RHB Securities Singapore, formerly known as DMG &
Partners Securities.
To illustrate how the charges impact your return,
here is a sample calculation.
If you buy 100 shares of M1 stock last trading at
$2.84 that cost $284, the charges you incur can be:
• a minimum
fee of $25
• clearing
fee of $0.09
• SGX trading
access fee of $0.02
• GST of
$1.76
So the actual cost of buying 100 M1 shares is $26.87 + $284, or
a total of
$310.87.
When you sell the shares, you will incur a similar
amount of cost, depending on the selling price.
That means to buy and sell the 100 shares, you will
be slapped twice with the fee and GST of $26.87.
To reduce the impact of the minimum brokerage fee
of $25, each trade should be around $9,100 in value, says UOB Kay
Hian's vice president of equities and financial products, Mr Goh
Yong Ren.
But with a larger amount, the potential loss could
be greater, he adds.
Says Mr Goh: "It would be more prudent for
investors to practise risk management instead of committing $9,100
per trade, so that they are not penny wise, pound
foolish."
A cash-funded account usually has a lower
commission rate, as transactions are settled with cash provided
up-front and are not a credit risk, says DBS Vickers Securities'
managing director for retail business, Mr Andrew Soh.
RESEARCH REPORTS
"A good brokerage should be able to provide access to timely and
comprehensive market research reports to help investors stay
abreast of the latest market developments and make sound investment
decisions," adds Mr Soh.
HSBC Singapore's head of retail banking and wealth
management, Mr Matthew Colebrook, says investors need to consider
their individual investment needs.
"For high-frequency traders, low trading fees,
high-speed platform, charting tools would be important.
"For medium- to longer-term investors aiming to
build an investment portfolio, a one-stop shop that offers a wide
range of investment products and consolidated view of wealth
holdings would be important."
TRADING PLATFORM
Online tools, charts and calculators can help investors make
more informed decisions, says Mr Elgin Ting, head of products group
at OCBC Securities.
"However, it is still crucial for a brokerage to
have knowledgeable trading representatives and provide reliable
customer service support, for the times when its customers need
assistance beyond what a computer can provide."
People, Investing made easy ← , The New Paper On Sunday, November 1
2015, Pg 21