You may have heard stories of people who have been making afortune on the stock market in Singapore. That has probably got you thinking ofhow you can follow the same path and retire early from your regular day job.
First things first, you need to realize that successfulinvesting in the stock market is not a walk in the park. It takes a lot ofpatience and understanding of how the market works, as well as a lot ofresearch and analysis of each stock. But worry not because this article willgive you a detailed rundown of everything you need to do in order to investsuccessfully in Singapore stocks in 2019.
CDP and Custodianaccounts
There are two ways to approach stock trading in Singapore.They include Central Depository (CDP) accounts and Custodian accounts with eachof them offering their advantages and disadvantages.
A CDP account is used to store the shares once purchased andit also grants the buyer full custody. Once you have full ownership of acompany’s shares, then you are considered a shareholder with vested interest inthe firm’s performance. Extra benefits f having a CDP account include havingtimely delivery of the company’s notices, annual reports and circulars.
A custodian account, on the other hand, allows you to tradeshares but you don’t have ownership. The shares are instead owned by astockbroker. The advantage of this approach is that the fees are lower, makingit a more affordable option. If you choose the custodian option in Singapore,then UOB Kay Hian is probably your best bet.
You can invest in shares as a retail trader where you buylow and sell high to make profit or you can purchase shares so that you canearn dividends. The latter usually requires a lot of shares to make decentdividends but both require a careful analysis. The idea is to build a portfoliothat consists of companies or stocks that perform well and that are wellmanaged.
Select an idealbroker
Whether a beginner or a seasoned trader, having the rightbroker is always essential in order to access more tools and maximize yourearnings. You need to take into account your preferred trading account whethera CDP or a custodian account. Below is a list of Singapore brokers and theirbrokerage fees.
Overall, DBS Vickers has one of the best offers since itcharges an S$10 minimum and its fee is 0.12%. This means that it has the lowestfees out of all the brokers available in Singapore and it allows directpurchases from the CDP account. A Cash Upfront account allows investors totransfer money into their accounts before they execute a trade. It alsorequires fewer fees and the regular DBS Vickers account features the T+3.
As pointed out earlier, buying stocks requires investors tocarry out a careful analysis that often should include evaluating the financialbooks of the balance sheets of target firms. Determine whether the companiesyou have listed are managed properly. Also, examine their level of debt andprofits.
One of the best ways to pick out winning stocks is to startevaluating from a market perspective. Determine which industries are likely tocontinue performing well come 2018. For example, firms that produce essentialproducts are always a good bet especially if there is a consistent demand fortheir products.
The importance of timing in stock trading cannot be stressedenough. If you choose the retail trading path, then you should consider takingadvantage of market lows. For example, Singapore stocks have performed poorlyin 2018.
Most armature traders lose money when the market crashes,they get emotional and sell at unfavorable prices to avoid further loss. Marketcrashes also present the best opportunities for traders to buy stocks and ridethe bulls when the stock recovers. This is a classic application of the “buylow sell high” principle.
Try to focus on stocks that have traditionally proved themselves as strong performers. Blue chip stocks are often the best stocks to invest in. Blue chip stocks refers to the shares of major corporations that are already well established. The shares of such companies are ideal investment opportunities especially for those who intend to earn dividends. However, they are often characterized by high share prices making them expensive to purchase. The best approach is to purchase when the market is in a slump.
How to deal withlosses
Stock trading is a “win some-lose some” game because themarket is sometimes favorable and other times it goes against you. Losses areinevitable but there are strategies to help reduce losses. The surest way is toalways be updated on any news that may affect a company’s stock. For example,the Brexit news this year have so far encouraged a bearish stock marketperformance.
Trade wars between China and numerous other countries havealso negatively affected the performance of many Singapore industries. This hasas a result affected Singapore stocks causing many companies to perform poorly.Being exposed to such information would allow you to execute vital measuressuch as selling stocks of some companies that might be affected before theytank. Market information also allows you to purchase the stocks at ideal timeswhich is preferably just before they skyrocket.
Profits made when the shares gain should offset the losseswhich is why beginners should also practice taking only a certain level ofprofit. The goal is to avoid being greedy or being exposed to too much risk.Investing in the stock market requires investors to practice proper moneymanagement techniques that will help them avoid losing money.
(By Neha Gupta)