4 Points to Note to Find the Best Online Broker in Singapore

In order to help you maximise your return on your investments and find the best online broker for your needs, we have compiled a list of key factors that you should keep in mind when choosing your broker.

Table of Contents

• Your Needs and Priorities
• Fees Chargeable
• The Type of Account That You Want
• What You Would Like to Invest In
• Finding the Best Online Broker in Singapore

Your Needs and Priorities

Depending on your level of experience, investment goals and financial situation, the type of investments that you should consider and the online broker that you should choose will vary.

Are You New to Investing?

For those new to this arena, you may place more importance on educational resources such as comprehensive glossaries and financial advisors who provide extensive investment advice. As such, you should choose an online brokerage platform that offers such services. However, it is imperative to note that with such services conveniently accessible to you comes a higher price tag.

On the other hand, if you are an experienced investor, you may prefer to have more independence and not pay for the additional services that you would not use. Thus, you may be looking for an online brokerage platform that simply allows you to place trade orders instead.

What Are Your Goals?

Through understanding your investment goals, be it to supplement your regular income or for it to become your primary source of income, you will be able to choose the type of investments that you should invest in and the platform to use. Because platforms often only offer a few products for you to invest in, it is crucial that you understand what you would like to invest in before opening an account with the online broker.

Related: How Smart Investors Can Use Leverage to Boost Returns

Fees Chargeable

As mentioned, depending on the range of services that you prefer, the prices charged will differ. But these are not the only fees charged by online brokers. Below are the common costs that online brokerage platforms will charge you.

Commission Fee

Because you are using their platform, online brokerage companies will charge you a commission fee to execute the transactions or for their services. Typically, commission fees are a percentage of your transaction amount.

Below is a table that summarises the commission fees charged by the following online brokers.

Minimum Fee

Apart from a commission fee, online brokers also charge a minimum fee. This fee is applicable to smaller investments. In cases where the commission fee is less than the stipulated minimum fee, the minimum fee will be charged instead.

To put things into perspective here is a case study using fees charged by Tiger Brokers.

As illustrated above, because the commission fee chargeable is less than the minimum fee of SG$0.99, the investor would pay SG$0.99 instead of SG$0.60.

Minimum Deposit

Referring to the minimum amount needed to open an investing account with your online broker, it is also important to take note of the minimum deposit imposed by your brokerage platform.

This is a fee that ensures that the profits gained will be able to cover the costs of services offered during the transaction. Generally, those who offer premium services tend to charge higher minimum deposits.

The Type of Account That You Want

When choosing the type of account to open, you will come across Central Depository (CDP) accounts and Custodian accounts.

Central Depository (CDP) Account

Managed by Singapore Exchange (SGX), it is an account that offers clearing, settlement, and depository services. As stated by SGX, the clearing fee is 0.0325% of the traded value.

Should you choose to open a CDP account, stocks bought will be under your name and you will become a shareholder of the company. Being a shareholder entitles you to the right to attend the Annual General Meetings (AGMs) as well as voting rights. However, you will only have access to the Singapore market.

Custodian Account

Managed by your chosen online brokerage, stocks bought will be under a nominee account and not be under your name. Further, they will be under custody by the brokerage platform. Typically having lower fees charges, you may only buy and sell within the same broker. However, you will have access to both Singapore as well as the international market.

What You Would Like to Invest In

With the wide range of investment options available, it is easy for first-time investors to be unsure of their key characteristics.

Bonds

Utilised by governments and companies to raise funds for specific projects, bonds help raise funds through borrowing from investors.

The two biggest types of bonds in Singapore are corporate bonds and Singapore Government Securities.

Corporate Bonds

Corporate bonds are used to raise money for research and development as well as expansion. While the interests earned from corporate bonds are taxable, they normally offer higher returns than government bonds.

Singapore Government Securities (SGS) Bonds

Backed by the Singapore government, the Singapore Government Securities (SGS) bonds carry a lower risk. SGS bonds pay a fixed interest rate and have maturities ranging from 2 to 50 years. Under SGS bonds, there are three categories – SGS (Market Development), SGS (Infrastructure), and Green SGS (Infrastructure). The table below shows the key differences between the three categories and their key characteristics.

Mutual Funds

Essentially, a mutual fund is a pool of money contributed by individuals for investing purposes. These individuals will then gain a proportionate amount of profit made by the mutual fund.

Such funds are popular as they are affordable, are low maintenance, and have high liquidity. Further, because the research and allocation of assets are professionally managed by fund managers. As such, mutual fund shareholders do not have any voting rights.

One type of mutual fund is an equity fund.

Equity

Equity investments are essentially monetary investments in a company through the purchasing of shares of that company in the stock market which is usually traded on a stock exchange. As such, investors only invest in equities if they expect that the company’s value will rise. This can take the form of capital gains or dividends.

Related: How to Pick Dividend Stocks For Your Investment Portfolio

Equity investment also allows for diversification of portfolio. Exposure to the various stocks reduces the risk of losses and maximises returns. Through investing in different areas, even if a few stocks are not performing well, the investor will still be able to reap gains from stocks in other areas that have performed well during the same period.

However, because equities are subject to market fluctuations and performances, it can be considered to be a high-risk investment.

Exchange Traded Funds

Similar to a mutual fund, Exchange Traded Funds (ETFs) are investment funds holding assets such as commodities, bonds, stocks, and foreign currency. Similar to mutual funds, ETFs are pooled investment security, which are tradable financial assets like equities. However, unlike mutual funds which are not bought and sold on an exchange, ETFs can be bought and sold on a stock exchange.

Such funds also offer a great degree of diversification as they can have multiple investments, maximising returns.

Related: Hedge Funds vs Mutual Funds vs ETFs – Which Should I Invest In?

Real Estate Investment Trusts

Defined by the Real Estate Investment Funds (REIT) Association of Singapore, REITs are “funds that invest in a portfolio of income-generating real estate assets such as shopping malls, offices, hotels and industrial properties with the aim of generating income for unit holders of the REIT.”

Similar to mutual funds, REITs are made up of a pool of investors. REITs are professionally managed with an aim to generate income distribution and long-term appreciation potential.

Related: How to Invest in REITs Effectively For Portfolio Diversification

Forex

As one of the largest and most liquid asset markets, forex, also known as foreign exchange, is a worldwide market for the trading of national currencies. International currencies have to be traded in order to conduct foreign trade and business.

Forex trading does not take place on stock exchanges but in an over-the-counter market, which refers to trading via a broker-dealer network.

The value of a country’s currency is dependent on an array of factors such as politics and economics. As such, economic instability such as issues caused by trade tensions with another country, or even a country’s domestic monetary policy will inevitably cause great volatility to the country’s currency.

Local vs International Stocks

For first-time investors, investing in local stocks may be a good start to get familiar with the investing process as you will already be familiar with their business performance. However, for those relatively well-versed in investing, you may want to consider investing in international stocks as well.

Apart from the obvious opportunity for diversification, investing in international stocks will likely give you higher rate of returns.

Almost half of the global equity market resides in the United States (US). There are countless opportunities ready for you to capitalise on internationally. With investment opportunities under the 11 Global Industry Classification Standard (GICS) stock market sectors – energy, materials, industrials, utilities, healthcare, financials, consumer discretionary, consumer staples, information technology, communication services, and real estate – investing in the US market is also a great way to maximise your returns.

Having said that, with high returns comes high risks. As the US market is relatively more volatile than the local listed companies in the Singapore market, investing in US stocks or in the international markets in general is more suitable for experienced investors.

Finding the Best Online Broker in Singapore

Having understood your needs and investment interests it is time to help you find the best online broker that fits your needs.

Curious to know more about the other platforms to find the best online trading platform in Singapore, check out our comprehensive online brokerage comparison in Singapore!

Read More:

• Best Online Brokerages and Trading Platforms in Singapore 2024
• 5 Financial Tips From A Former Hedge Fund Investor To Get Ahead
• How Investors Can Get Hurt From Over-Diversifying Their Portfolios
• What You Can Invest In Singapore With S$5,000
• 3 Investing Tips for Millennials: Start Investing Early, Aggressively and Independently

Cover image source: Unsplash