If starting your investing journey in 2016 by buying stocks is on your to-do list, then you will need to first start off by opening a couple of accounts. Mainly, there are the brokerage and Central Depository (CDP) accounts. In this article, we will share some basic information that you need to know on both these accounts.
Opening A Brokerage Account
To open a brokerage account, you can go to the individual websites of brokerage firms to apply. Alternatively, just walk in to any branch.
Due to the competitive nature of the industry, the commission fee across brokerage firms are quite similar. However, if you are intending to buy small amount of stock at any one time, Standard Chartered commission fee is cheaper as it does not charge a minimum fee.
For example, if you are buying 1,000 shares at $0.30 each, the total cost of the shares would be $300. Most brokerage firm will charge a minimum fee of $25. If you work out the maths, this is about 8.3% of your investment! It does not take a genius to figure out that an 8.3% transaction cost (one-way) is not going to do you much good as you intend to grow your wealth.
A brokerage firm such as Standard Chartered that charges no minimum commission can help you save quite a substantial amount, particularly if you usually invest only in small quantum.
It is also important to note that transaction is a two-way charge, commission applies for both the purchase and sale of shares. Therefore, it is important to choose a brokerage firm with commission that suits the investment amount you have budgeted for. If you intend to invest $200 each time, go for one without a minimum charge. If you intend to invest $20,000 each time, go for one that has a low commission percentage.
It is also worthwhile to note that different brokerage firms use different trading platforms. Hence, it will be good to check out the different features they could offer so as to facilitate your trading.
|Stock Brokerage||Min Fees (S$)||Trading Fees|
|<S$50K||S50K – S$100K||>S$100K|
|Maybank Kim Eng Securities||25||0.275%||0.22%||0.18%|
|Lim & Tan Securities||25||0.28%||0.22%||0.18%|
|SAXO Capital Markets||25||0.15%||0.15%||0.15%|
|UOB Kay Hian||25||0.275%||0.22%||0.20%|
Opening Your Central Depository (CDP) Account.
A CDP account is an account that “keeps” all the stocks you have. They also provide services such as securities lending and borrowing; transfer, deposit and withdrawal of securities etc.
To open an individual CDP securities account, you must meet the following conditions:
- 18 years old and above.
- Not an un-discharged bankrupt.
- Have a bank account with one the following banks in Singapore – Citibank, DBS/POSB, HSBC, OCBC Standard Chartered Bank and UOB.
- Complete the application form. (You can type the details using computer, however you have to print out and sign.)
- Photocopy your NRIC or Passport.
- Include one of the following original documents or e-statement (dated within 3 months):
- Bank Statement (from any Monetary Authority of Singapore licensed banks)
- CPF Statement (CPF website)
- Latest notice of assessment for income tax (IRAS website)
- Mail the signed application form and supporting documents to:
The Central Depository (Pte) Limited, 11 North Buona Vista Drive, #06-07,The Metropolis Tower 2, Singapore 138589
- Wait for the result and CDP will send you the token for the account as well.
For more information, visit CDP website.
If you head down to the branch office of one of the brokerage firms, the service staff there would help you with processing all the documents you need for both your CDP account and your brokerage account. Thereafter, simply wait for the documents to arrived to your mailbox.
Good luck and welcome to the club!