6 Steps to Start Passive Investing in Singapore

6 Steps to Start Passive Investing in Singapore

One of the most common questions that new investors have is “how to buy stocks and shares in Singapore?”. It is such a basic and important question but one that is hard to find a complete answer to easily.

This article sums up how to start investing in Singapore in 6 steps. As a visual overview, the info graphic below shows the 6 steps to start passive investing in Singapore.

6 Steps Investing in Singapore

Step 1: Open a Bank Account

Having a bank account will make buying and selling of financial assets and securities easier. You will be able to use the bank’s Internet platform to transfer money into your trading account or for money to be transferred when buying and selling securities. Learn more here.

Step 2: Open a Trading Account with a Stock Broker

In order to trade (buy and sell) financial assets, all retail investors have to open up a trading account (also known as a brokerage account) with a MAS-approved stock broker, also called a brokerage firm or brokerage house.

A stock broker is not a bank and you will not find one in your regular bank, although a bank may own a brokerage firm.

The stock broker is the middle man between you and the various stock exchanges where securities are listed.

Most good stock brokers will have online platforms that allow you to make trades yourself at a lower fee. Or, you can request trades through a human being called a remisier or dealer.

The term “retail investor” refers to you; an individual investor (or small investor) who is trading financial assets for your personal account and not for another company or organization (an institutional investor).

Learn more here.

Step 3: Open a CDP Account

In order to trade securities in Singapore, most financial institutions will require you to open a Direct Securities Account with The Central Depository (CDP) or simply referred to as a CDP account.

The CDP is basically a place where all (in most instances) the securities (financial assets) you have bought in the local stock market are held, also known as “Custody of Shares”.

You can open the CDP Account through your chosen stock broker when you open a trading account with them.

Learn more here.

Step 4: Research the Security You Want to Invest in

In investing, you will be investing in financial assets or securities like cash, stocks and bonds. Other common securities to invest in are mutual funds (called unit trusts in Singapore) or ETFs.

Choosing the right security, such as a stock, to buy requires skill and experience to analyze the security. To know whether a stock is a potential good pick, investors analyze a stock or company using methods known as Fundamental and/ or Technical Analysis.

Fundamental Analysis is the process of analyzing a business’s financial statements (assets, liabilities, earnings, cashflow etc) to determine the intrinsic value of the business in relation to its stock price.

Technical Analysis does not look at the health of an individual business but focuses on trends, patterns and forecasting the direction of stock prices through the study of charts including past market data, primarily price and volume.

This may sound really complicated for the new investor. But, the good news is that if you are a new and/ or passive investor looking to invest for the long term (10 years or more), you do not need to worry about individual stock picks to build a passive investment portfolio.

Learn how to create a passive investment portfolio in Singapore here.

Step 5: Buy the Security Through Your Stock Broker

When you decide upon the security you want to invest in, you must look up the symbol or stock ticker of that specific security. You can Google the information or look it up on Yahoo Finance or Google Finance.

After you have found the symbol, you can order the security through your (human) stock broker or better yet, use the online trading platform to incur lower transaction fees.

Learn how to buy & sell a financial asset or security here.

Step 6: Grow Your Investment Capital & Reinvest Earnings Over the Long Term

Passive investing is for the long term and one of the keys to making your investments successful is to grow your investment capital regularly and reinvest your earnings throughout your investing life.

Reinvesting your earnings from your investments will allow compounding to take effect over time. Compounding is the process of generating earnings on an asset’s reinvested earnings.

A disciplined approach to growing your investment capital overtime will grow your portfolio exponentially over time.

Learn the 3 keys to growing your wealth as a passive investor here.

Good luck!

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