Which brokerage account should I sign up for?
Before you start investing, you would need to set up a brokerage account to trade or invest. A brokerage account is a licensed entity which lets you purchase stocks of companies or most other financial investments when you place funds with them.
Just in case you have no time to read about the various criteria of setting up a brokerage firm, here’s a summary of my extensive research for brokerage firms:
|Brokerage Firm||Fees (S$)||Trading Fees||Types of Accounts Offered|
|CIMB Securities||$25||0.18%||0.22%||0.28%||Cash Trading|
|$25||0.18%||0.22%||0.28%||Young Investor Account|
|$40||8% p.a||Securities Borrowing|
|$18||0.18%||0.18%||0.18%||Futures Trading and Forex|
|Citibank||$28||0.25%||0.20%||0.18%||Cash Upfront Normal|
|$28||0.25%||0.20%||0.18%||Cash Upfront Privilege|
|DBS Vickers||$25||0.28%||0.22%||0.18%||Cash Trading|
|KGI Securities||$25||0.275%||0.22%||0.18%||Ordinary Account|
|$25||0.18%||0.18%||0.18%||Cash Upfront (Collateral)|
|Lim and Tan||$24||0.266%||0.209%||0.171%||Cash Trading|
|$12||0.12%||0.12%||0.12%||Cash Upfront (Collateral)|
|$10||0.18%||0.18%||0.18%||Cash Upfront (Prefunded)|
|OCBC Securities||$25||0.275%||0.22%||0.18%||Cash Trading|
|$25||6% per annum||Share Financing|
|$18||0.18%||0.18%||0.18%||Cash Upfront (Equities Plus)|
|Philip Securities (POEMS)||$25||0.28%||0.22%||0.18%||Cash Mgmt Account|
|RHB Securities (formerly DMG)||$25||0.275%||0.22%||0.18%||Cash Trading|
|Saxo Bank||$15||0.12% (Standard)||0.15% (Active, at least 100 trades per monh)||Cash Trading (Classic)|
|Cash Trading (Premium)|
|Cash Trading (Platinum)|
|Standard Chartered||$ –||0.20%||0.20%||0.20%||Cash Upfront (Personal)|
|$ –||0.18%||0.18%||0.18%||Cash Upfront (Priority)|
|UOB Kayhian||$25||0.275%||0.275%||0.275%||Cash Trading|
Before we get dip our feet in the pool of investing, we would have to find the right brokerage firm for yourself. Being a beginner in investing, there should be a few criteria to look out for when choosing your brokerage firm. These criteria can be rather different with that of an experienced investor, such as the types of investment tools available, amount of capital etc etc… I will be breaking down the various criteria into sections for the ease of reading. It’s going to be a pretty long read. Are you ready?
1) Which type of brokerage accounts is for you?
This is the most important criteria to me. Many of us start investing with a smaller capital because we are still learning and we do not want to put all the eggs in a single basket, do we? So, obviously we look for the lowest brokerage fees available. For certain brokerage firms, there are different kinds of account, such as the Young Investor Account, which is quite suitable for teenagers or young adults to start their investment journey. I personally would choose to set up a cash trading account or young investor account as I would usually like to buy and hold my investments. For the beginners out there, I have broken down the pros and cons for the different types of accounts offered for the Singapore market, namely:
- Cash Trading Account: requires you to pay the full amount of the shares after your order goes through, most allow up to one to two working days for the full payment
- Pros: You only pay when your order goes through and do not have to pay for additional interests like the margin account nor would you have to let your money stay in the account like cash upfront account. The shares you buy will be stored in your CDP account.
- Cons: Your order will not be processed should you fail or forget to pay, which happened a few times to me, but you could apply GIRO to ensure that this problem is eliminated.
- Cash Upfront Account: requires you to put in cash upfront to fund the account before you start trading.
- Pros: This kind of account is good for investors who want the lowest brokerage fees possible. As they require you to fund the account first, the brokerage fee will usually be lower than all other types of accounts.
- Cons: If you do not use the full amount placed in the account, the opportunity cost will be the higher amount of interest you can earn by putting your money in somewhere else first. The shares that you buy will be held custody by the bank.
- Margin Account: no need for upfront funding in the account. You get to borrow the money from the broker to buy the shares first and you should pay/ get to earn the difference of the share price which you paid and sold for.
- Pros: No need to pay upfront cash, lower opportunity costs as compared to cash trading account if you have unused cash lying around in the account. You usually only fork out a small sum for the shares and loan the rest of the money from the broker.
- Cons: If you get a margin call, your stocks will automatically be sold out if you do not make your payment for the losses in time. Also, you need to pay an amount of interest for taking this loan from the broker.
- CFD Account: it is like margin account, but you do not own the shares.
- Pros: The agreed buy and sell price is over the counter (OTC), hence may not follow market price movement. This can be taken as a pro or con.
- Cons: You might lose more than 100% of your initial investment.
2) Products available for trading
Depending on what kind of investment products you would like to buy such as stocks, futures or bonds etc. For beginners, it would be good to start with exchange traded funds (ETF) and stocks first, before venturing into more sophisticated derivatives. This factor is not too important as you can simply set up an account with another brokerage with the best fees for the products you are going to trade. In the Singapore market, there are ETFs, REITs and shares available for you to trade.
3) Compare the investment tools and seminars being provided
As a beginner, it would be good to check if the brokerage offer any free tools for you (eg free company researches, charting tools etc), as well as if they provide any seminars for you to learn more about investments. Based on my experience, I have attended numerous financial seminars and found that the quality of seminars that banks and brokerage firms provide are generally better than that of those provided by private companies. Banks and brokerage firms usually hold the seminars with the purpose of getting people to sign up for a brokerage account so their seminar will focus more on how to use their own platform to get more information. Although it is less investment-strategy based, they do provide you a relatively comprehensive basic information to start with. Whereas for certain “free trials” of private companies, they have the purpose of promoting their investment/ trading courses to you. Hence, they might not be that transparent with sharing the information as compared to banks or brokerage firms.
I look at 3 things from the seminars provided by the brokerage firms, namely trading strategies, platform tutorials and industrial outlook.
4) Is there any mobile application available for you to trade via mobile?
Another important factor to look out for is if the platform has a mobile application for the ease of trading. Nowadays, most brokerage firms would have offered the trading platform on mobile as the demand for mobile use has been rising. Although this is not of high priority, it is a good to have.
5) Does your brokerage firm provide you with real time customer support and good service?
Finally, you would want to choose a brokerage firm with good service. You do not want to get a firm with crappy service that cannot help you when you need help the most. After scanning through all the brokerages, there are quite a few with the helpdesk service specially catered for the US time zone for US stocks investors. This is a plus point as I have personally experienced such a situation whereby I needed help during the US time zone but the helpdesk was only opened in the Singapore time zone.
The below is another summary of my research regarding the other criteria of customer service, mobile application and seminars provided by those brokerage firms in Singapore.
|Brokerage Firm||Seminars Available||Free Tools Provided||Mobile App Available||Service|
|CIMB Securities||Platform Tutorial, Industrial Outlook, Trading Strategy||Charting Tool, Free Research||i*Trade@CIMB||9|
|Citibank||Industrial Outlook (only if you are a priority banking member, prefunded >$70,000)||Charting Tool, Free Research||Citibank||9|
|DBS Vickers||Platform Tutorial, Industrial Outlook||Charting Tool, Free Research||DBSV mTrading||9|
|KGI Securities||Platform tutorial||Charting Tool, Free Research||KGC Connex (Online Trading), KGI Contrax (CFD Products)||10|
|Lim and Tan||Platform Tutorial, Industrial Outlook||Charting Tool, Free Research||Lim & Tan||8|
|Maybank||Platform Tutorial, Industrial Outlook, Trading Strategy||Charting Tool, Free Research||KE Trade||8|
|OCBC Securities||Platform Tutorial, Industrial Outlook, Trading Strategy||Free Research||Trademobile||9|
|Philip Securities (POEMS)||Platform Tutorial, Trading Strategy, Industrial Outlook||Charting Tool, Free Research||POEMS SG||9|
|RHB Securities (formerly DMG)||Platform Tutorial, Industrial Outlook||Charting tool, Free research||RHBInvest 2.0||9|
|Saxo Bank||Platform Tutorial||Charting tool, Free research||SaxoGo||9|
|UOB Kayhian||Platform Tutorial, Industrial Outlook, Trading Strategy||Charting Tool, Free Research||UOB Kayhian||6|