Project Plutus - 2 How to Invest in Singapore

How to Invest In Singapore 💵

There are a myriad of investment schemes and products in Singapore. Let's take a look at how we can invest in some of the more popular types of investments!

How can I purchase stocks in Singapore?

Step 1: Open a Central Depository (CDP) account

A CDP account stores and safekeeps your Singapore securities. This includes stocks, bonds and other securities on the Singapore Exchange (SGX) as well as Government Securities. To apply, you must be 18 years old and you will require a Singapore bank account [2]. Next, link your bank account to your CDP for dividends and sales proceeds to be credited to it.

Step 2: Open an online brokerage account

The online brokerage account is the platform where you will 'Buy' and 'Sell' shares. There are more than 10 different brokerage firms in Singapore that offers online brokerage account platform, such as OCBC Securities and Phillip Securities.

CDP-linked brokerage accounts [2]

Source taken from Best Brokerage Accounts To Start Your Investment Journey In Singapore

Note that the CDP account is specific to Singapore securities. If you intend to purchase overseas stocks, you will need to open another custodian brokerage account, and the brokerage firm you open your account with will act as the custodian for your overseas stock purchases.
There are many brokerage firms in Singapore that offer this service, such as Tiger Brokers and UOB Kay Hian.

Custodian accounts [2]

Source taken from Best Brokerage Accounts To Start Your Investment Journey In Singapore

Step 3: Fund your account

In the same way that you have to top up your e-wallet before you can make a purchase, you will need to transfer money into the account before you can purchase stocks.

How much money should you put into your online brokerage account? It depends on how many shares you want to purchase and how much they cost. As a rule of thumb, have slightly more than what you think you'll require because you'll need to factor in commission fees.

Step 4: Choose a stock

Choose a stock from the companies listed on the stock exchange, such as OCBC, CapitaLand, Keppel, Singtel listed on the SGX.

For overseas stocks, corporations like Facebook, Apple, Nike and Coca-Cola are companies that are well-known and tradable on the market.

Step 5: Purchase the stock

You need to consider the price and the number of lots/units to purchase. For Singapore stocks, the minimum number of shares to buy is 100. For example, if you're buying OCBC shares at S$12 each, 100 units would cost you $1,200 (excluding fees).

Step 6: Check that the stock is in your account

Once the purchase goes through, you should be able to see the stock in your account.

If you've opened a CDP account and used a CDP-linked brokerage account, you can check if the stock is in your CDP account. If you're using a custodian account, you can check if the stock is in your wallet.

How can I purchase bonds in Singapore?

Buying a bond

You can buy a bond at issuance, through a public offer. You can also buy a bond based on prevailing market price on the secondary market (after issuance) through the Singapore Exchange (SGX) in the same way you purchase stocks.

Purchase on the secondary market is subject to brokerage fees, and your SGX CDP will reflect the number of bonds you have purchased.

Selling a bond

You can hold the bond to maturity and expect to receive the principal amount back provided the bond issue does not default.

Before the bond matures, you can also sell it in the secondary market. You make a capital gain if the selling price is higher than the purchase price. Likewise, you suffer a loss if the selling price is lower.

Types of bonds in Singapore

1) Singapore Government Securities and Savings Bonds

Bonds sold and backed by the Singapore Government are considered risk-free investments. There are 2 types: Government Securities (SGS), and Singapore Savings Bonds (SSBs).

The key differences are [3]:

Source taken from Moneysense 2020, Understanding bonds

2) Corporate Bonds

Bonds issued by companies such as SIA or statutory boards like Jurong Town Corporation (JTC) are called Corporate bonds. They generally carry more risks compared to government bonds, and therefore their interest rates are usually higher. The typical coupon (interest) rate ranges between 3% to 6%. [4]

You can buy corporate bonds listed on SGX in the same way you purchase stocks.

Source taken from SGX

How to Read Bond Quotation on SGX [4]:

Corporate bonds listed on SGX has information coded into the names.

Example: SIA 3.03% 240328

SIA : Issuer is Singapore Airlines Ltd (SIA)

3.03% : Coupon rate is 3.03%

240328 : Maturity Date is 28th March 2024

1 lot = 1000 units, hence price is $1.003 x 1000 units = $1,003 for 1 lot

3) Bond Funds and ETFs

You can also invest in bond funds and exchange traded funds (ETFs) to benefit from diversification, cost-effective and passive income [4].

There are 3 Singapore bond ETFs trading on the SGX as of Aug 2023:

Source taken from SGX

References

Ching Sue Mae, "How to Buy Stocks in Singapore: 6 Steps to begin Investing in Shares", last modified October 2022. https://www.singsaver.com.sg/blog/how-to-buy-shares-in-singapore
Ching Sue Mae, "Best Brokerage Accounts To Start Your Investment Journey In Singapore", last modified August 2023. https://www.singsaver.com.sg/blog/best-brokerage-account-singapore
Government of Singapore, "Understanding bonds", Moneysense, last modified 2020, https://www.moneysense.gov.sg/articles/2018/10/understanding-bonds
Alvin Chow, "Singapore Corporate & Retail Bonds: A Simple Guide (2022)", DrWealth, last modified January 2022. https://www.drwealth.com/retail-bonds-singapore/