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In the investment world we live in today, Singapore investors are no longer limited to just investing in companies that are listed on the Singapore Exchange (SGX). We can, and really should, access foreign stock exchanges to capitalise on global investment opportunities. A globally diversified portfolio not only gives us more investment opportunities, but also ensures that our investment portfolio isn’t just concentrated on just Singapore.
In this investment guide, we will help you understand some of the key matters that you need to know before entering the US market.
Why Trade US Stocks?
In terms of market capitalisation, the New York Stock Exchange (NYSE) and the NASDAQ are the biggest stock exchanges in the world today, with a market capitalisation of about USD 22 trillion and USD 10 trillion respectively at the point of writing.
In fact, there are individual companies like Apple, Alphabet (Google), Amazon and Microsoft that have a market capitalisation of more than USD 1 trillion each.
That’s why it makes sense that many Singapore investors would want to gain investment exposure to US stocks. And unlike the past, where investing in US stocks could be difficult and expensive to access, there are multiple ways we can get started on our investment journey today in US-listed companies with little money.
How Singapore Investors Can Trade US Stocks In The Simplest Way
The first thing most of us would think about when it comes to investing in the US is to buy the stocks of these companies directly. High-growth tech companies such as Apple, Amazon, Alphabet (Google) and Microsoft on the NASDAQ are great stocks to start with while established American companies like Berkshire Hathaway, JP Morgan Chase & Co, Visa and Johnson & Johnson are listed on the NYSE. Even Sea Limited (the parent company of Shopee), a Singapore company, is listed on the NYSE.
As Singapore investors, we can invest in any of these individual companies by buying their stocks directly through a broker such as Futu Singapore, giving us access to U.S. stock exchanges. Futu Singapore is a wholly-owned subsidiary of Futu Holdings Ltd (“Futu”). Futu itself is also listed on NASDAQ.
Is It Still Possible To Buy US Stocks Though Prices Are High?
If we are new to investing in US stocks, one thing we will quickly observe is just how expensive some of the stocks of these companies are compared to Singapore stocks.
For example, if we have S$3,000, we can either buy 1,000 Singtel shares (Singtel is trading at S$2.44 as of 26 November) versus buying 1 share of Alphabet (Alphabet is trading at US$2843.66 as of 26 November). This might make it seem like US stocks are unaffordable as compared to Singapore stocks.
However, on the SGX, we need to invest in a minimum lot size of 100 shares. For example, if DBS share price is S$31, the minimum purchase of 100 shares will cost us S$3,100. For US stock exchanges, we can buy just 1 share. If we want to invest in Apple shares but only have USD 156, we can still buy one share based on its current price of about USD 156. So ironically, in spite of the fact that share prices of US stocks tend to be higher, this ability to buy single or fractional shares makes the US shares a lot more accessible to investors who only have a small amount to invest.
How To Check If The Price Is Low Enough Before Buying Specific US Stock?
If we want to invest in a specific stock but are wondering whether we can go in at a lower price, one data point that may be useful is the market depth of the stock. Market depth refers to the order queue for a particular stock on both the buy and sell-side. We can access market depth through level 2 data that will show us how many people are queuing up to buy or sell the stocks at what price and quantity. This can give us insight into how short-term price is likely to move and whether it makes sense to queue or to just accept the current bid-ask price.
Watch Out For Your Transaction Costs
If you are investing only a small amount, you have to pay close attention to your transaction cost. Paying a commission fee of USD 10 or more makes no sense if you are only investing USD 156.
For example, when I first wanted to invest in U.S companies years ago, some brokerage firms were charging as high as a minimum of USD 25 for each transaction. So if I invest USD 1,000, the commission charges are already 2.5% of my investment capital. This eats into my return.
To solve this, we should consider using brokerage platform with competitive fees such as Futu SG. Through their moomoo trading platform, we can invest in U.S stocks at just $0.0049 per share, with a minimum of $0.99 per order, and a platform fee of $0.005/share, min USD 1. As part of their launch promotion, we can also enjoy 180 days free commission* trading in US market through moomoo. The good thing with Futu is that you don’t need any minimum balance to start investing. So this is great, especially for those who may only have a small sum of money but want to kickstart our overseas investment journey.
Invest In US ETFs If We Are Not Able To Select The Best US Stocks To Buy
For a safer bet, we can choose to invest in a diversified pool of companies via Exchange-Traded Funds (ETFs) as opposed to picking individual stocks. By investing in ETFs, we can get broad-based exposure in the markets or sectors that we choose to invest in without the trouble of picking out individual companies on our own.
What Exactly Are ETFs?
ETFs are essentially a basket of securities that you can trade through a brokerage firm. ETFs are bought and sold like any other company when stock exchanges are open, the only difference is that instead of putting your eggs into one basket, you are essentially segregating your funds to invest in a pool of companies.
How To Find Low-Cost ETFs To Buy?
Similar to investing in stocks, we want to look at the commission charges that we are paying each time we make a transaction, especially if we are investing a small sum of money. The moomoo platform by Futu offers extremely low fees for access to ETFs in US, Hong Kong and Singapore market. So, it’s a suitable choice if you want to invest in ETFs in these markets.
At the same time, investing in ETFs means incurring ongoing expenses because ETFs are managed by a fund.
For example, the Vanguard S&P 500 ETF has an exceptionally low expense of just 0.03% p.a. In contrast, if we invest in the SPDR STI ETF or the Nikko AM Singapore STI ETF that tracks the Straits Times Index (STI), annual expense is at 0.30% p.a., or about 10 times more costly. So keep an eye out on ETF management expenses as they can eat into our returns over the long-term.
Whether we are short-term or long-term investors, it’s always important to keep up to date on how the markets we are investing in, or intending to invest in, are doing. The moomoo app is useful because it allows us to follow relevant business and financial news of the companies that are on our watchlist 24/7 directly on the app. We can easily stay updated on the companies that we are keeping tabs on while we are on our daily commute to the office or while having our meals.
For those of us who prefer visuals and charts, moomoo offers charts in candlestick, line, bars and other indicators for our technical analysis. It also provides useful graphical financial reports that give us an overview of the company’s financial situation. As an app, it offers a fully digital experience from research content that we may need, analysis and tools that we could use, and of course, the ability to make transactions.
You can read our step-by-step guide on opening an account with moomoo here.
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