Stocks have great investment potential, but how can you start? This beginner's guide explains how to start investing in stocks in Singapore.
People have been telling you for years to invest in stocks, but you didn’t know where to begin, right? Well, today’s your day to scratch another item off your bucket list. We’re going to give you an overview of what you need to know to invest in stocks in Singapore.
Create a Budget
In the beginning, it’s easy to get bitten by the investing bug and want to begin purchasing stocks immediately. While this can be exciting, it can also result in throwing your money away.
Each day, as new financial news occupies the internet, you can easily get caught up in investing in the next hot thing (ask American investors about the Gamestop rollercoaster). It can seem like a good idea. After all, if you put money on everything that the so-called experts and the guy at the end of the bar thinks can’t miss, sooner or later, you’ve got to hit it big, right?
The truth of the matter is the only people who can afford to gamble truckloads of money on a whim are the very people who are so wealthy they don’t need the money their hoping to earn. All other investors tend to follow more common-sense pathways to wealth.
First of all, they stick to their budget. They’re not cheapskates, but frugal. They just don’t allow headlines to alter their plans. It doesn’t matter whether the economy is riding high or sinking low. Smart investors stay on the yellow brick road.
- Determine your investing budget.
- Stick to it.
- Never give in to the temptation to invest money that you can’t afford to lose because it’s earmarked for other things, such as the rent, utility bills, or your grandma’s long overdue Brazilian butt lift.
Find a Compatible Brokerage
You’ll need a brokerage firm through which you’ll purchase your stock. But don’t select the first brokerage you encounter.
Would you want to purchase new shoes without trying them on? What about buying a new car without taking it for a test drive? What about test driving a new car while wearing new shoes? (Wait, forget that last thing.) The point is, why sign up with a brokerage firm without sampling their service?
Fortunately, it’s a commonplace practice for today’s brokerages to offer online test platforms on which you can get a feel for how their trading environment operates. It’s similar to that new car. Some controls will feel intuitive, while others will take a little getting used to.
But this is your chance to find out which platform gives you the sense that you would be comfortable sitting at the controls. After you’ve found a brokerage with a trading environment that appeals to you, what’s next?
Their website will walk you through the steps to open a new account. Some people prefer to open a brokerage account through their bank if their bank is affiliated with a brokerage.
Having a bank account and brokerage account under the same corporate umbrella has its advantages. It’s much simpler to arrange for funds to flow from one account to the other as needed.
Of course, you can make similar arrangements between your bank account and an account with a separate brokerage. There may be a few more steps involved, but the process will work similarly.
Watch Out For Fees
Otherwise, like most other comparison shopping, you want to find the best deal. Each brokerage will charge fees. Well, somebody has to pay for their private corporate jets with leopard print upholstery.
Your job is to find the one with the most reasonable rates based upon the level of service it offers. For starters, you want to know how much the brokerage charges per transaction. Some firms will give their fees in dollars, while others will quote a percentage.
Take your time to calculate which broker is offering you the best deal. Determine how often you’re likely to conduct a transaction. The more often you transact, the lower you want the fees, or else you’ll quickly eat through your account with brokerage fees.
How to Start Investing in Stocks
There may be quite a number of individual companies whose potential excites you. You can’t wait to own their stock. That’s a natural reaction to entering the stock market, but caution is needed.
Individual stocks can rise or fall on a whim or on a social media hot take by the CEO. Let’s call it the Elon Musk Effect. That’s exciting but not the foundation of a good stock portfolio.
Investing for beginners should start on solid ground. Generally, there is no more stable stock investment than an index fund.
An index stock is a fund designed to reflect the overall performance of a financial market. In this case, Singapore investing would mean purchasing an index fund that shadows the Singapore Exchange. However, you can also purchase on the Singapore market index funds that track foreign markets, including those in Japan, the United States, Europe, and China.
An index fund’s portfolio contains a cross-sampling of the stocks found on that exchange. So, when you invest in the fund, you’re really investing in the total performance of that market.
There are many advantages to an index fund. For starters, it eliminates the need to research each company in which you have an interest.
An index fund generally only needs to update its portfolio whenever there’s a seismic shift to the market its tracking. For example, years ago, when tech companies began elbowing their way past old-school industrial age behemoths, certain index funds adjusted their holdings to more accurately reflect the fact that buggy whips aren’t making a comeback.
Index funds have an outstanding track record. Annually, they are often among the best-performing funds. Their strategy is simple. They don’t try to beat the market with clever schemes. They simply try to match the market because, in the long run, the market always wins.
The popularity of index funds has steadily climbed since their introduction in the 1970s. They aren’t just stocks for beginners. More and more hotshot, gunslinging investors have come to the humbling conclusion that it’s extremely difficult to beat a good index fund.
Expand Your Education
Now that you’ve gotten started with the market, you’ll want to expand your education. Be careful not to fall under the tutelage of the latest internet investing guru (or your Uncle Clem). Instead, we recommend that you dive into the time-tested advice of legendary investors such as Warren Buffett and Charlie Munger.
The principles they promote can apply to investing in Singapore just as well as they have worked for American and global investing. Learn from the men and women who’ve traveled this road before you. They can point out the potholes and dead ends to avoid.
Get Free Advice on Investing in Stocks in Singapore
If you’re trying to save as much money as possible for investing, we know a great way to get investing advice on stocks in Singapore without paying a single cent. All you have to do is keep returning to the investment section of our blog for guidance on growing that single piggy bank into a big fat herd.