Singapore is the Switzerland of Asia – money flows through the Singapore economy freely, and in huge quantities thanks to the various lax tax laws and relatively fewer restrictions on financial institutions. This often translates to many corporations relocating their businesses and headquarters right here, in the heart of South East Asia, bringing many more jobs and prosperity to Singapore.
This also means that for the residents here, the opportunities to invest in derivatives and stocks are ample. However, with so many companies and institutions here vying for retail investors to join their ranks for extra commissions and greater market liquidity, there should be serious consideration on the part of the retail investors to know who offers what benefits, and to choose the institution that best benefits an individual investor.
Here are a few terms we should familiarise ourselves with to get started:
First, ‘brokerage firm’. This will be seen and used pretty commonly on other websites as well as by other people. Simply put, a brokerage firm allows you to buy or sell shares and derivatives on the market. Yes, the actual stock market as in the New York Stock Exchange (NYSE), NASDAQ and the various Asian and European markets if you’re planning to invest in those too.
For their services, they charge commissions for every stock or derivative you choose to buy or sell which will vary across the different firms. This means that if you buy a stock, you’ll be charged a flat commission fee, and the same goes with selling them, even if it is only one stock. Usually though, most people don’t buy just one stock, unless a single stock is worth tens of thousands of dollars like the Berkshire Hathaway A stock.
There are also other factors to consider like benefits to some other brokerages such as free options or derivative trading lessons, free trades, location of trades (Asia, NYSE etc.) and bulk discounts on larger orders, but they are perhaps somewhat less important. These will also be discussed later!
So, which is the best brokerage account to use for our investing purposes?
We would consider only 3 important factors: Commission fees, benefits and trading platform.
First, let’s consider commission fees. Let’s be honest: if a single trade of even a single stock has a commission fee of $10, it would be actually quite expensive. Can you imagine if the stock is worth $5, and you have to pay $10 just to trade that?
While it isn’t a very terrible thing, having higher commissions will definitely eat into any gross profits that you potentially will acquire. This is perhaps one of the largest sore points especially for beginner traders and investors who do not have access to a lot of funds, so every dollar counts.
Also do note that commissions are on BOTH buying AND selling. i.e. If you were to buy a stock, there will be a commission cost. After buying the stock, you’ll own the stock, meaning you own a part of the company. When you want to sell the stock, there will ALSO be a commission fee. It’s almost like a double charge for the same stock.
A common strategy is of course, having done research on the company’s fundamental strengths – this will come from the finance sheets, and quarterly reports – and then, buying as many as your funds allow and hold it; only liquidating when the price of the stock hits your desired price, or if you’ve found a better stock that offers better returns.
The mass buying brings down the cost of commissions per stock, as well as maximise the profits from holding a stock by a good company.
Second, we shall consider benefits the company offers. Take optionsXpress for example. This firm offers a fair amount of free trading classes, as well as occasionally holding opinion polls and draws that allow its retail investing clients to win prizes.
There are other firms that offer various benefits for joining them! However, each offers different benefits which may suit your needs better. Do note who offers what, and email them if you’re unsure!
The last consideration will be on the trading platform. Most people would argue that the trading platform doesn’t really matter terribly much. Normally I’d agree with this statement. Many brokerage firms offer the same MT4 style trading platform software (the latest variant is MT5). However, while the base software is the same, each platform offers a different type of user interface and graphics. A firm, ThinkOrSwim, even developed its own software to install and comes with a very complex interface meant for more advanced traders.
OptionsXpress offers no platform; instead, it is an online web client where you can do all your trading. It saves hard drive space and allows for direct access without the need for extra systems authentication. It also has different safety features when compared to ThinkOrSwim.
Whatever your style of interface you prefer or benefits, you’ll be able to find one that suits your needs. In fact, many, if not all brokerage firms offer a demo account for you to explore and test out the system. If you like it, you can then proceed to emailing them on what you prefer or if you would want to partner with them for your future investing successes.
|Brokerage Firm||Market served||Commissions|
|ThinkOrSwim (ToS)||U.S.A||USD 10.95/trade|
|DBS Vickers||Singapore||0.28% of contract $|
|Citibank||Singapore||0.25% of contract $|
|CIMB||Singapore||0.275% of contract $|
|UOB KayHian||Singapore||0.275% of contract $|
|OCBC||Singapore||0.275% Of contract $|
Also, do check out our website’s investment section if you’re planning on learning how to invest. It has tons of basic terminologies and concepts that will help put you on the right path to financial success!
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