Stock Trading Basics That Every Singaporean Investor Should Master
Once you have finished linking your trading account with your securities account, you are now officially ready to order and process stock transactions without any hassles. Using the Electronic Payment System with this account will make your trading a lot more convenient and uplift you from the dark ages of payment protocols.
Now that you have anchored yourself comfortably by registering your account, you are one step closer to becoming the savvy, money-minting stock investor you always dreamed of being.
The Basics of Stock Market Investment
Shares are financial instruments utilized by companies to raise capital. The prices of a company’s shares are tied to a mix of macroeconomic and microeconomic conditions. They represent one’s stake in the ownership of the company and entitle you to a part of its profits via dividend payments.
Although, the payout of dividends is not a guarantee since it depends on each company’s policy on profit investment. Most buyers prefer to stick to the conventional ‘buying low-selling high’ strategy of stock investors and reap the benefits when the company they have invested in has performed remarkably well.
Investors have 2 major types of shares to choose from:
- Ordinary shares
- Preferred shares.
While preferred shares entitle you to a host of benefits such as favored dividend payouts, better liquidity, and privileged voting rights, ordinary shares offer no such special perks.
Purchasing Your First Stock in the Market
In order to purchase shares, you contact your broker directly or log in to the brokerage firm’s website to place the order. In the Singapore stock market, the minimum quantity requisite for a transaction usually is set at 1000 shares. A group of 1000 shares is known as one lot.
Depending on the contract value of your stock, Singaporean investors must pay a S$25 minimum charge or 0.28% as commission on the transaction you make.
Stock investment is a craft best mastered by flying solo and conducting your own research to target the most profitable company shares for your portfolio. To the trained eye, a swift look at the financial statements of bargain stocks listed on the SGX website can give a good idea about the viability of investing in them.
However, the ideal method of stock investment is a matter of perspective – perspective that shifts as per your financial objectives. The two key factors that determine the route to your investment portfolio are:
- Investment timeline
- Monetary goals
Some Singaporeans just want enough to earn a modest passive income in their retirement years; whereas, some want to earn a million dollars in 15 years to live in glorious opulence. According to your appetite for risk, you can choose from blue chip stocks that offer a low risk-low yield route for your investments, or penny stocks that promise a high risk-high reward scenario.
The Act of Buying
As soon as you complete the buying transaction, the CDP will dispatch a contract statement to you on behalf of the brokerage firm you associate with. The CDP is an organization whose role is to oversee the proper processing of the stock in your securities account.
The payment for your stock purchase must be made 3 days after your order has been placed. For instance, if you ordered 2000 shares of StarHub to be deposited into your securities account on Monday, then your payment will be officially made (T + 3) days after it, i.e. Thursday.
Once the payment has been executed, then the transfer of your ordered shares to your securities account will be completed.
The Act of Selling
When your stock finally hits a high point that meets with your financial expectations, you can cash out your stocks and transfer the money made from their sale to your securities account.
The money made by your sale of company shares will only get deposited in your account 4 days after the transaction order has been issues. Therefore, if you have finalized the selling order on Monday, then the money made from that sale will be transferred to your account on Friday.
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