• Find out more and sign up for Thrive at bt.sg/thrive

📈 Trading account

What is it? A trading account with a brokerage, or trading platform, allows you to buy and sell shares on the stock exchange. It’ll also allow you to buy options, futures, bonds and other securities such as exchange-traded funds (ETFs).

Examples of brokerages include: DBS Vickers, OCBC Securities, Poems, IBKR, moomoo, Webull, as well as robo-adviser Syfe. 

Things to consider when picking a brokerage: 

Fees

Brokerage firms generally charge a commission for every transaction you make based on how much you trade. You’ll want to keep this low because they can eat into your investment returns.

Take note of whether there’s a minimum commission that will be charged for each transaction. This can be as much as S$25 per trade – equivalent to a 5 per cent fee for buying or selling stocks worth S$500. 

Some brokerages, such as moomoo and TD Ameritrade, charge zero commissions on US stock trades and may be something you want to consider. Do note, however, that they have other fees. You may also place orders through a broker (i.e. a human) via a phone call if you need assistance placing trades, though these services come at a price. 

Central depository (CDP) or custodian account

This gets a little technical. The CDP account only applies to securities bought on the Singapore market. But if you are keen on global markets, you will need a custodian account.

Meanwhile, you have options for Singapore stocks. You can decide whether to buy or hold them in a CDP account under your name or to hold it under the custody of the brokerage.

Buying stocks using a CDP-linked trading account is generally more expensive than using a custodian account. But holding the stock under your name will allow you to attend company annual general meetings and vote on corporate actions. 

Types of products offered

Here, you should start thinking about what investment products you’ll want to buy because brokerages have different offerings. 

To buy stocks listed on the London Stock Exchange, for example, you’ll need to pick a brokerage that has access to that market. If you intend to buy bonds, ETFs or options, make sure the brokerage offers these products for that desired market as well. 

Ease of use

Trading platforms aren’t always the most user-friendly for beginners, so pick one that you’ll be able to use. Making a mistake can be costly. (Think buying 100 shares of a stock for S$10 each versus buying 10 shares for S$100 each.)

Signing up:

• When signing up, you’ll need to fill in the standard personal information. These days, many platforms allow you to fill these in automatically via SingPass’ MyInfo.

• You may be asked some compliance questions, such as declaring your source of funds and indicating your income and net worth.

• Sometimes, you may be asked to indicate whether you want to open a margin account. This basically means you’re allowed to borrow money from your brokerage to buy stocks. ⚠️ Avoid this unless you know what you’re doing because trading on borrowed funds can be extremely risky.

You may be asked about your experience with different investment instruments and which instruments and markets you want to trade in. This section is important because you may be restricted from certain products (e.g. options) or markets based on what you indicate. 

Although ETFs are common among younger investors, the platform may restrict you from buying them if you’ve never invested before. That’s because some ETFs are classified as specified investment products that are more complex.

You may be able to get around this by completing a free e-learning module on the Singapore Exchange’s (SGX) website and providing your brokerage with documents showing that you have passed the assessment. If you’re unsure, check with your brokerage directly. 

Pro-tip: Many trading platforms offer promotions and referral rewards for signing up and using their platform. You’ll typically only be eligible for these when you sign up for the first time!

🗄️ CDP account

What is it? You’ll need this if you want to open a CDP-linked account with a brokerage for Singapore securities. Think of it as a safe where your shares (which used to be actual pieces of paper in the old days) are kept.

Pro-tip: Even if you’re not interested in buying Singapore stocks, it’s best to get this out of the way first, since it won’t cost you anything. You’ll need one eventually if you want to buy Treasury bills or Singapore Savings Bonds, which have been offering higher interest rates.

Signing up:

• Make sure you have a bank account with one of these banks: Citibank, DBS/POSB, Maybank, OCBC, Standard Chartered Bank, HSBC or UOB

• Fill up the online form on SGX’s website. For Singaporeans and permanent residents, it’ll only take a few minutes to complete using SingPass’ MyInfo.

• Once you’re done, you’ll receive a confirmation email from SGX. At this point, SGX will process your application and may contact you if it requires further information.

• After a few weeks when your CDP account is ready, you’ll receive another email from SGX with instructions on how to log into your account online

A word of warning

Three things to bear in mind before you start putting your money to work:

1. Before you invest, set aside sufficient cash savings for emergencies. We talked about this in one of our first few posts on Instagram. (Follow us if you haven’t!)

2. Make sure you’ve paid off your high interest-bearing loans, such as your credit card debt, because it doesn’t make sense to earn 10 per cent a year investing while you’re paying more than 25 per cent on your loans.

3. Once again, beware of hidden fees and charges when it comes to trading. Zero-commission trades may not mean free trades.

And if you’ve got that settled, then…

TL;DR

• When picking a brokerage, consider the fees involved because they can eat into your investment returns

• Make sure the brokerage you choose offers the investment products you intend to buy

• Consider also whether you want to open a CDP-linked or custodian account

• It’s worth opening a CDP account even if you’re not interested in Singapore stocks now

• Ensure you have enough savings and have paid off your high interest-bearing loans before investing