The first step can be the hardest. #adulting. You probably heard enough about how important it is to start investing early, how compound interest will make your money grow and how inflation eats away your cash, yet you just never got started on opening an account.
Whether you are putting off due to the lack of knowledge, lack of funds or are just a chronic procrastinator, there’s no better time to start investing than today.
Here’s how to get started investing as a young investor, whether you are a tertiary student, young adult or Full-time National Serviceman (NSF).
Young Investors Can Open An Account To Start Investing From 18 Years Old
Age is not a limitation when it comes to investing. The regulatory minimum age to open an investment account is 18 years old. Some accounts need a minimum age of 21 as they invest in Specified Investment Products (SIPs).
You can open a Central Depository (CDP) Securities Account from as young as 18 years old. This is an account that is unique to Singapore and it enables you to store all the stocks, REITs, ETFs, bonds and other securities that you buy on SGX into your personal CDP account, rather than with the stockbroker you used to complete the transaction.
Once you opened a CDP account, you would then need to open a brokerage account to actually execute the buying and selling of your investment trades.
If you are younger than 18 years old, you would need to have an accountholder (18 years and older) open an account and trade on your behalf. In these cases, an account like FSMOne’s beneficiary account may be suitable.
You Don’t Have To Open A CDP Account To Start Investing
For those who just want to dive straight into investing or intend to buy overseas stocks, you can skip opening a CDP account and open a custodian account.
If you are buying overseas stocks, you are automatically using a custodian account because the brokerage is storing your investments on your behalf. Overseas stocks and securities cannot be stored in our CDP accounts.
One benefit of custodian accounts is that they usually offer lower fees.
To find out more about custodian accounts, you can read more in 5 Things To Understand About Using A Custodian Account When Buying Stocks
Low Or No Fees Are Crucial When You Are Investing Small Amounts
Typically, brokerages will charge commission fees based on the contract value per trade. This ranges from 0.08% to 0.28%. However, what young investors really need to watch out for is the minimum commission charges which can be as high as $25.
When your investment amount is only $100, it doesn’t make sense to pay $25 in transaction fees. That’s a 25% loss immediately, your investment needs to gain $25 just to break even before earning you anything.
Look for a broker who can offer you low or no fees, even for small amounts, to make the most of your investments.
Invest Small Amounts Regularly
As a young investor, your funds may be limited. After all, an NSF enlistee only receives a starting allowance of $580. In this case, a regular savings plan (RSP) or a dollar-cost averaging (DCA) strategy is your friend.
A regular savings plan is typically offered by brokerages to enable you to invest a small sum (usually at least $100) on a regular (monthly) basis. The charges are usually lesser than buying the stocks directly and you can buy in smaller minimum quantities.
Best Places To Start Investing
For any investor starting out today, the number of options available can be intimidating. You have the local banks and their associated brokerages, local brokerages, overseas brokerages that have a local presence, mobile brokerages and robo-advisors.
All these are good and valid options, so how do you as a young investor choose?
Local brokerages include those with and without their associated local banks. While the fees are slightly higher, these brokers offer CDP account integration. These names also more familiar to Singaporeans who have been already using their banking services.
Best suited for: investors who value a local name, invests in mainly Singapore stocks or prefer to use integrated services (i.e. investing and banking with the same bank)
Overseas Brokerages With Local Presence
These overseas brokerages have set up a local presence to cater to our Singapore market and are regulated by MAS. These brokerages offer attractive low commissions and custodian accounts only
Best suited for: investors want the cheapest commissions or invests in mainly overseas stocks, traders
While most brokerages do offer some form of mobile access, these brokerages stand out for their mobile-first user interfaces and low commission fees.
Best suited for: investors who value on-the-go mobile access, traders
Check out our Singapore Online Stock Brokerage Account Fees Comparison for a comprehensive comparison of the brokerages available in Singapore.
Unlike brokerages, robo-advisors incorporate advisory elements into their product offerings. Their investment offerings are already optimised and strategized on your behalf.
Best suited for: investors who want an advisor, investors who wants the least effort while having someone (or a robo) strategise on their behalf.
Check out our Robo Advisors In Singapore (2021): What You Need To Know Before Investing for a comprehensive comparison of the robo-advisors available in Singapore.
Keep Learning and Educating Yourself About Investing
Most of our local brokerages have young investor programmes to encourage young investors (from the age of 18) and they often feature events, seminars, webinars and other educational resources to help young investors get started. These include DBS Vickers Young Investor Account, OCBC Young Investor Programme, POEMS Young Investor Programme, FSMOne Young Investors Programme. CGS-CIMB Securities’s ProsperUS even offers lifestyle-related experiences such as wood crafting, fitness and martini tasting sessions for their members, on top of investing educational resources.
Additionally, you can always check out the personal finance events and webinars curated by DollarsAndSense to improve your own finances and investment knowledge.
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