Singapore is a regional financial hub. If you plan to invest in stocks in Singapore, you are investing in the economies in this region. Singapore stock exchange is the vehicle of financing and investing activities around this area. In this article, you will know how to invest in Singapore stocks with an aim of growing your wealth step by step.
Are You Ready to Invest?
You see yourself fit for investing, aren’t you? Ask yourself the following questions because they are integral to your thought on investing no matter you are fit or not?
1. Pay up high-interest debt
We’re talking about a crucial event in your life; let’s be serious! You have various debts: credit cards, student loans, personal loans. Some of them are interest-expensive debts.
Prioritize your debt before you start investing. It’s senseless you use savings to invest while still paying the interest. Clear up at least most of the debt before planning the next step. Read more on ways to become debt free.
2. Make a checklist
What do you want for investing? It seems like a philosophical problem, but the answer is straightforward. What are your investment objectives? Comfort retirement, children’s education, travel, business startup, or wedding.
Second, make a timeline of these goals; you will use the funds to fulfill your dreams. Once you make up the timeline, we can go to the next step.
3. How do you achieve the goals?
If your investment horizon exceeds 5 years, you should choose stocks over others. Investment professionals say stocks or stock funds are ideal for achieving mid-to-long-term goals. However, they are volatile, and you might meet with short-term price fluctuations. But you can reduce much of those risks with long-term investments.
4. Set up an emergency fund
You may encounter emergent situations in your life. Taking away your investment to meet adverse circumstances might not be ideal for handling your investments and daily life matters. A cash reserve of at least 6 months is necessary for unforeseen events and your investing plan.
5. Do your homework
Investing involves researching, analyzing information based on your investment preferences and risk levels. It is an art and science job, so you should spare some time and effort on doing pre-investing investigations because it affects your future.
6. Consult a financial advisor
Talking with a financial advisor is the best way out if you are busy or think you aren’t sure of the job. Well-planning is the beginning of a successful investing journey. You may get valuable advice from a good planner who can give you a professional opinion regarding investing and how to reach your goals.
7. Make use of tax benefits
You may have had a CPF account with a bank. A CPF account is a savings account(ordinary account) where your stock purchases can go up to 35% of investible savings from the tax-relief contributions. You can double down the benefits by using the account for long-term stock investing.
How to Invest in Singapore: 5 Steps to Follow
With technological advances, investing becomes straightforward. Following the 5 steps and make your move.
Step 1: Open a CDP Account
If you buy stocks in the Singapore stock market, you may need a CDP account with the Singapore Stock Exchange to store the shares you have purchased. Some financial institutions may use custodians to hold clients’ shares and overseas stocks.
A drawback is when you change a brokerage, you have to instruct a custodian to change the shares to a new custodian or your CDP account with the Singapore exchange.
You can link your CDP(Central Deposit Account) to your account with a brokerage. The CDP or a custodian will collect the shares bought when you purchase them in the local stock market.
Step 2: Open a brokerage account
Online brokerages are popular in Singapore. Brokers like Moomoo, Tigers, Syfe, and banks, licensed registrants from the Monetary Authority of Singapore(MAS), offer investors speedy and comprehensive investment services. Besides, commissions and other costs are important factors when you trade with them.
Nowadays, most brokerages have reduced or eliminated trade commissions so clients can invest in stocks without a fee. Finally, you may have to link your brokerage accounts or bank accounts to your CDP account from the account website.
Step 3: Fund your Account
You should know the minimum funding requirements of your trading account though most have waived the amounts for competition reasons. The next is to choose one of the common options offered by most financial institutions: 1. FAST transfer(internet; banking); 2. PayNow; 3. Telegraph Transfer. You may ask your brokers or banks for more funding options. Besides, incentives should not be the only reason for using a financial institution. Cost and support should be the factors you weigh on your decisions.
Step 4: Start a Strategy
What will you do to invest? It is a question that may sway how and what you do in the process. If you are looking for steady income streams and growth from your portfolio, you should look for value companies like banks, insurance companies, exchange-traded funds, or real estate investment trusts to be the main focus. They pay stable dividends and offer steady growth to your assets.
If you are aggressive and have a longer investment horizon, you may like growth-oriented stocks like technology and innovative startups. They pay fewer dividends but have the potential to grow their businesses to larger sizes.
Therefore, you should set up an investing strategy before deciding how to invest.
Step 5 Understand Various Types of Assets on the Stock Exchange
You may find more investment products and channels are available to investors from the exchange. You may be perplexed by the variety of investment options in front of you. You may suffer a loss if you aren’t aware of the risks embedded in them. The risks a technology corporation incurs may differ than a bank does. Due diligence is what you should do before putting money into a stock.
Investors’ most popular investment vehicles comprise 1. Blue-chip stocks; 2. Reit Estate Investment Trusts; 3. Exchange-Traded Funds.
Blue-chip stocks: They are quality enterprises rated AAA by rating agencies. Investors can benefit from stable income streams and long-term capital growth.
Real Estate Investment Trusts(REIT): A trust is a collection of income-producing properties which distribute regular, high and, stable dividends to investors.
Exchange-Traded Funds(ETF): An ETF invests in components from an index like the Straits Times Index in Singapore. It is a low-cost and passively-managed fund suitable for long-term investors.
Growth technology stocks: They consist of semiconductor manufacturers like AEM, UMS Holdings, and life science companies, medical devices, and consumer health products, e.g., Venture Corporation.
What to Expect After You Invest?
Once you have decided your investment objectives, you follow a strategy made and reviewed by investing in the stocks. And should you sit back and wait for dreams to come true? It is only a part of the story; here is what you should do after investing in your dreams.
1. Investment Reviews
You need to regularly review your investment portfolio so the stocks will keep on track. Several questions can help you better appraise the combinations.
2. Monitor your performance
A regular review of your portfolio performance helps you keep the performance on schedule. You can set a quarterly or semi-annual review so you can correct any missteps, if any, in time.
3. Rebalance your portfolio
If the components deviate from your plan or your investment goals have changed, you should change the investment mix. Rebalancing is you re-allocate your asset in a combination suitable to your requirements.
For example, your original portfolio mix is 50% growth stocks and 50% value stocks. After 6 months, the growth has expanded to 70% of a portfolio. You adust to the original combination by selling 20% growth stocks and buying 20 value stocks to keep the mix on track.
4. Learn to Invest
Investing universe is an ever-changing world. Not surprisingly, new types of investments come and may go off the stage now and then. Five years ago, some of us might have never thought the cryptocurrency business would be a booming business. Keeping updated with the financial information helps you understand and invest.
5. Emotional Intelligence
The financial market is a dynamic and fluid world. If you are new to stock investing, you may be shocked watching abrupt price changes and unpredictable market ups and downs. Like said earlier, investing is an art and science technique. You should know stock price changes are typical market reflections.
Sticking to your plan and keeping track of your portfolio performance is best to achieve your objectives. Calm investing is what you require in investing besides analysis.
6. Talk to your Financial Advisor
A financial advisor is your best partner if you need help. You may not have time or want to get much involved due to other affairs. A financial advisor’s job is to advise on and manage your portfolios and offer assistance on your financial matters in case of need.
If you intend to invest in Singapore stocks, you should pay off your existing debts; first, write up a list of investment objectives and state how to achieve your goals. Besides, setting up an emergency fund and studying your investment tools before you invest are necessary steps you should take. After you invest, you should review your portfolio performance to avoid falling out of your schedule and re-balance your portfolio once the proportional mix or your investment goals have changed.
- Get well prepared by paying off your debts and setting up an emergency fund before investing.
- Draw up your investment objectives.
- Learn investment targets.
- Stick to your path.
- Regularly review and re-balance your portfolio or consult a financial advisor for help.
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