So you’ve read up enough about how to start investing. You’ve triple-checked your emergency fund. You’re finally ready to rake it in on the stock market! Now what?
The next step is to pick an investment brokerage which allows you to buy your first shares. Easier said than done, though. From bank brokerages like DBS Vickers and UOB KayHian, to independent brokerages like Saxo Markets and Interactive Brokers, the sheer number of brokerages to choose from can be overwhelming.
So how do you decide which investment brokerage is best for you?
Here are 3 main factors you need to look out for when choosing the best brokerage firm for you:
Commission fees: How much it costs to buy or sell your investments
Account type: Whether it’s a CDP or custodian account
Trading platform:How user-friendly the brokerage is
1. Investment brokerage commission fees
Investment brokerage firms charge a commission fee for every transaction on the stock market. When you buy shares, you get charged. When you sell shares, you also get charged.
There are two parts to the commission: The fee itself (a percentage of your transaction) and the minimum fee (a dollar amount). Here’s an example:
You’re buying $3,000 worth of Singtel shares
The brokerage charges 0.1% commission, with a minimum fee of $10
You end up paying $10 (the minimum fee) instead of $3 (0.1% of $3,000) on your shares
If/when you sell your shares, you pay another $10
If you’re the kind of investor to just park a big lump sum for decades, commission fees won’t make much of a difference to you. But if you invest frequently, expect to be charged commission fees multiple times. So it’s important to pick a brokerage that charges affordable rates.
You can compare online investment brokerages on our brokerage comparison page.
It’s also important to take note that a brokerage usually charges different rates for shares in different markets, such as US stocks and Singapore stocks.
Right now, the cheapest investment brokerages on the market for Singapore stocks are moomoo and Tiger Brokers. These brokerages charge a 0.03% commission with a S$0.99 minimum commission fee.
SAXO‘s commission fee is also at 0.03% with a $1 minimum fee, but only for their Diamond tier membership.
The commission fees at independent brokerages like the ones above are super cheap compared to bank brokerages. For example, DBS Vickers charge 0.18-0.28% per trade, subject to a minimum of $27.
2. CDP account vs custodian account
Wondering whether to go for POEMS or SAXO? Well, one of the key differences is the “Stock Holding Type” or the type of account they use for Singapore stocks (if you’re eyeing US stocks, you’ll need a custodian account for sure).
POEMS has a Central Depository Account (CDP account), while SAXO’s is a custodian account. What’s the difference?
CDP account: Stocks are held under your name, in your own personal CDP account. You have full shareholder rights such as attending AGMs (annual general meetings). If the brokerage goes bankrupt, your ownership of the shares will not be affected. On the downside, CDP accounts generally charge higher fees.
Custodian account: The brokerage owns the stocks on your behalf, so the stocks are technically not in your name. Sounds risky, but MAS regulates the financial industry very tightly in Singapore, and most brokerages keep custodian accounts separate so that they will not be affected financially. One of the biggest plus sides to custodian accounts is that they generally charge lower fees.
If a CDP account appeals to you more, the big name brokerages typically offer them:
3. Investment trading platform
Finally, you’d want to check out the investment brokerage’s online trading platform—either a website and/or mobile apps. These let you check stock prices and invest on the go.
Naturally, you would want to pick an investment broker with an accessible, user-friendly, and non-buggy online trading platform. If you can’t invest online with ease, then what is even the point? Might as well join the queue at Phillip Capital.
So before you commit to a specific investment broker, make sure you test out their platform to see if it’s something you’d be happy using time and time again.
If it’s buggy, doesn’t display the right information, and doesn’t have the tools that you need—forget it, there are other fish in the sea.
In case you need it: Here’s how to open a CDP Account
If you have decided on an investment brokerage that lets you own stocks via CDP, then you’ll need to set up a CDP securities account.
To be eligible to open an account, you need to be at least 18 years old and not an un-discharged bankrupt. You then have 2 options to open your account
Open your CDP account directly with The Central Depository—it’s a very straightforward process
Create a sub-account with a “Depository Agent”—that’s a stockbroking firm, trust company or bank nominee.
Basically, while you can deal with as many different brokerage firms as you want, you only need to open one CDP securities account to deposit all the stocks you’ve bought.
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Bonus: Best investment brokerages for US stocks
Apart from letting you buy and sell shares on SGX, all the investment brokerages we talked about also extend the same services in major overseas stock exchanges.
Commission fees and minimums are different for each stock market, and you can totally use one investment brokerage for SG stocks and an entirely different investment brokerage for US stocks.
Here are the cheapest brokerages for US stocks:
If you’re trading in overseas stock markets, the whole CDP vs custodian account thing doesn’t matter. The Central Depository is only for trades on SGX, and is not an option for overseas stocks. So custodian accounts are the only option.
In addition to these commission fees, be aware of additional fees and taxes which vary from market to market. For more on that, read our guide to buying US stocks.
Good luck! Share this article with anyone who wants to start investing.
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