How to Buy Your First Stock in Singapore: 2024 Step-by-Step Guide

Investing in stocks is one of the best financial decisions you can make, and the earlier you start, the more gains you'll likely enjoy. When you buy a stock, you’re buying a piece of a company, hoping that it will grow and perform well over time, leading to returns in the form of capital gains or dividends. 

You don't need a large sum to start investing—many brokerages allow you to open an account with minimal funds, making it easy to begin your investment journey. For those who are still learning, some brokers even offer paper trading, where you can simulate trades without risking real money. 

Stock trading can be both simple and intricate—it’s exciting, full of opportunities, but also involves risks. Before diving in, it's important to understand how stock trading works and the tools you have at your disposal. 

In this guide, we’ll walk you through every step you need to take to confidently invest in the Singapore stock market, including setting up your brokerage account, choosing your first stock, and making your first trade.

Here’s how to buy stocks in Singapore in seven easy steps.

Step 1: Decide how you want to invest

Before opening a brokerage account, it's important to decide how hands-on you'd like to be with your investments. Different approaches suit different types of investors, so take some time to think about your ideal strategy:

• Invest on Your Own: If you enjoy the idea of researching and selecting individual stocks or funds, you can open a brokerage account and start investing. This guide will help you understand how to choose the right account and manage your investments.
• Practice First: If you're not ready to use real money, consider opening a paper trading account. Many brokerages offer this feature, allowing you to practice buying and selling stocks with virtual funds until you feel more confident.
• Get Professional Help: If you'd rather not pick stocks yourself, a robo-advisor might be the right option. Robo-advisors like StashAway offer services that invest your money for you based on your risk tolerance and financial goals, often for a low fee.

Understanding what type of investor you want to be is crucial before jumping into stock investing. Whether you decide to manage everything yourself or prefer automated help, each approach has its pros and cons. Take the time to evaluate what suits your comfort level and long-term goals best.

Step 2: Decide between CDP-linked or custodian account

When selecting a brokerage account, you will encounter two main options: a CDP-linked account or a custodian account. Each of these options comes with its own advantages and limitations, making it important to understand which suits your investing style best.

CDP-linked account: With a CDP-linked account, stocks are registered under your name and held in your Central Depository (CDP) account. Essentially, you are the official owner of these shares and enjoy the rights of a shareholder, such as voting privileges and the ability to attend annual general meetings. CDP-linked accounts are typically used for trades conducted on the Singapore Exchange (SGX).

Custodian account: A custodian account, on the other hand, is where your brokerage holds the shares on your behalf through a nominee account. The legal ownership is with the brokerage, though you retain the financial benefits of the stocks. Custodian accounts are generally required for purchasing overseas stocks, and they offer a more streamlined experience for traders who don’t need direct control over their shares.

If you are a short-term trader, a custodian account may be more cost-effective, as you can avoid some of the higher fees associated with CDP-linked accounts. On the other hand, if you are a long-term investor who values shareholder rights and prefers more control, a CDP-linked account might be a better fit.

Eligibility criteria for opening a CDP account

To open a Central Depository (CDP) account, you must meet the following requirements:

• You must be at least 18 years old, as this is the legal age to enter into financial contracts in Singapore.
• You must not be an undischarged bankrupt, which ensures financial stability and eligibility to manage financial instruments.
• You need an account with one of the designated banks (DBS/POSB, OCBC, Citibank, HSBC, Maybank, UOB, or Standard Chartered) to enable the Direct Crediting Service (DCS), which automatically credits dividends and cash distributions to your bank account.

Opening a CDP account - self-serve or assisted

Opening a CDP account is a straightforward and free process. Here’s how you can get started:

1. Apply Online: You can apply for a CDP account online through the SGX website. The process takes about 15 minutes, and you can use MyInfo through Singpass for faster application, or manually fill out the required form.
2. Documents Needed (For Singapore Citizens/ PRs using MyInfo): Singapore bank account details; a scanned copy of your signature; and Tax Identification Number (TIN), typically your NRIC number. 
3. Document Needed (Foreign Tax Residency): Country of tax residency; Tax Identification Number (TIN); and Completed Form-W9 (for U.S. tax residents).
4. Confirmation: Once submitted, you will receive a notification by post to confirm that your CDP account is active. After that, you can link your CDP account to any local brokerage to start investing.
5. Brokerage Assistance: Alternatively, brokerage firms can assist you in opening a CDP account by submitting the necessary forms on your behalf. They typically provide updates within 10 business days.

Step 3: Choose a brokerage account

Once you've decided between a CDP-linked or a custodian account, the next step is to choose a brokerage account that best suits your needs. Below is a breakdown of brokerage account fees and charges for both CDP-linked and custodian accounts.

CDP-linked brokerage accounts

To connect your brokerage to your CDP account, ensure you have your CDP account number ready when signing up with the broker. Most major brokerages guide you through this process as part of their account-opening procedure.

Custodian Accounts (Based on SG Stocks)

Custodian Accounts (Based on US Stocks)

Dabbling in US stocks has gotten cheaper and far more accessible, thanks to the new online brokerages in recent times. Here's how much (or how little) you'll have to pay when trading US stocks.

Other fees besides commission fees

In addition to commission fees, there are several other costs associated with stock trading that investors should be aware of:

Platform Charges

• Platform Fee: Some brokerages charge a platform fee for the use of their trading services, which can vary based on the provider.

• Charges for Fractional Shares Trading: When purchasing fractional shares, some brokerages may apply additional fees.

SG Stocks Market Level Fees

• Trading Fee: A trading fee of 0.0075% of the traded value is charged on transactions conducted on the Singapore Exchange (SGX).

• Clearing Fee: There is a clearing fee of 0.0325% on all trades executed on SGX.

• Goods and Services Tax (GST): GST is applicable on brokerage services at the prevailing rate.

Foreign Stocks Market Level Fees

• Exchange/Trading Fee: Each market has its own exchange or trading fee. For instance, the trading fee for stocks on the Singapore Exchange is 0.0075% of the traded value.

• Transaction Levy: Some markets, such as the Hong Kong Exchange, impose a transaction levy on top of the trading fee. For example, trades on the Hong Kong Exchange incur a trading fee of 0.005% of the transaction amount, plus an additional 0.0027% as the transaction levy.

• Stamp Duty: Certain countries, including Hong Kong, Malaysia, and China, impose stamp duties on trades. For example, stock trades on the Hong Kong Exchange incur a stamp duty of HK$1.00 per HK$1,000.00.

• Goods and Services Tax (GST): Many countries have their own GST, VAT, or sales tax policies. For instance, trades involving Malaysian stocks incur a 6% GST on commission fees.

• Withholding Tax (For Overseas Stock Dividends): Dividends earned from foreign stocks may be subject to withholding tax. For instance, dividends from US stocks are subject to a 30% withholding tax, whereas Hong Kong has a 0% withholding tax on dividends.

• Capital Gains Tax: Some countries tax capital gains from the sale of stocks. In Singapore, capital gains are not taxed, but countries like the USA, South Korea, Australia, and Canada may impose capital gains tax. For example, South Korea imposes a tax of up to 25% on annual capital gains exceeding 50 million South Korean won.

Step 4: Research the stocks you want to buy

Now comes the exciting part—choosing your first stock. This step involves research and understanding the different types of stocks available on the Singapore Exchange (SGX) or any other foreign stock exchanges out there. Depending on your risk tolerance and investment goals, here are some investment options you can consider:

Blue-Chip Stocks

Blue-chip stocks are well-established, financially stable companies that are leaders in their industries. Examples in Singapore include DBS, Singtel, Singapore Airlines, and Keppel. These companies may not experience rapid growth like some international tech giants, but they are considered relatively stable and often provide steady dividend payouts. 

Many investors choose to hold blue-chip stocks long term to benefit from consistent dividends and gradual capital appreciation. If your plan is to accumulate stocks that offer dividends, make sure to research each company thoroughly, as not all blue-chip stocks offer attractive dividends.

Exchange-Traded Funds (ETFs)

ETFs are a great way for beginner investors to gain diversified exposure to the stock market. An ETF is a basket of stocks that tracks a specific index, such as the SPDR STI ETF that tracks the Straits Time Index (STI) and SPDR S&P 500 ETF Trust that tracks the S&P 500 index.

Investing in ETFs provides diversification, as your money is spread across multiple companies rather than being tied to a single stock. ETFs are ideal for those who are not interested in picking individual stocks but still want to participate in the stock market with relatively lower risk.

Read more: Guide to Index ETFs Investing

Real Estate Investment Trusts (REITs)

REITs are a popular investment choice in Singapore, especially for those who are interested in gaining exposure to real estate without the need to buy property directly. REITs like Mapletree, CapitaLand, and Ascendas invest in commercial properties such as shopping malls, office buildings, and industrial parks. 

They typically pay out a high percentage of their income as dividends, making them an attractive option for income-focused investors. REITs are a great way to gain real estate exposure with lower capital requirements and less risk compared to direct property ownership.

Read more: Guide to REIT investing in Singapore

Growth Stocks

Growth stocks are companies that are expected to grow at an above-average rate compared to the broader market. They may reinvest their earnings into expanding their business rather than paying dividends. 

While growth stocks come with higher potential returns, they also carry higher risks. Investors in growth stocks are betting on the company's future potential, and these stocks tend to be more volatile.

Dividend Stocks

Dividend stocks are shares of companies that regularly distribute a portion of their earnings to shareholders in the form of dividends. Many blue-chip companies in Singapore, such as DBS, UOB, and OCBC, are also popular for their attractive dividend yields. Dividend stocks are ideal for investors seeking a steady stream of income from their investments.

Read more: Best dividend stocks in Singapore

Some common research strategies include fundamental analysis (assessing a company’s financials, industry position, and future prospects) and technical analysis (looking at stock price trends and patterns). Tools like SGX Stock Screener or your broker's research portal can be helpful in making informed decisions about which stocks or funds to invest in.

Step 5: Setting a budget

Setting a budget is one of the most important steps when beginning your investment journey. It allows you to define clear boundaries, understand how much risk you can comfortably take on, and avoid overextending yourself financially. Knowing how much you want to invest also helps in planning your strategy.

How Much Money Do You Need to Start Investing?

The amount of money required to start investing depends largely on the price of the stock or fund you want to buy. Share prices can range from just a few dollars to thousands of dollars.

Fortunately, many brokerages now offer fractional shares, allowing you to invest with a smaller amount even if you cannot afford a whole share. This makes it easier to access high-value companies without needing a large initial investment.

How Much Should You Invest in Stocks?

 A common approach is to follow the 50/30/20 rule: allocate 50% of your income to essential expenses, 30% to discretionary spending, and 20% to savings and investments. This breakdown can help ensure a healthy balance between enjoying your life today and preparing for the future.

Once you've determined how much to save, the next step is to decide how much of your savings to invest. For a balanced portfolio, the traditional 60/40 rule suggests allocating 60% to stocks and 40% to bonds or other conservative investments. This strategy helps manage risk while still allowing for growth. 

When it comes to individual stocks, it's generally advisable to limit their share of your portfolio, as they carry higher risks compared to diversified funds. A good rule of thumb is to keep individual stocks to a smaller portion of your overall investment portfolio—no more than 10-15%—to avoid concentrated risk.

In summary,

• 50/30/20 rule - 20% to savings and investments
• 60/40 rule - 60% to stocks and 40% to bonds
• 10-15% of a single stock in portfolio - to avoid concentrated risk

Step 6: Define your investment strategy

Before diving into buying stocks, it's crucial to establish a well-thought-out investment strategy that aligns with your financial goals, risk tolerance, and investment horizon. Here are a few popular strategies that you can consider:

Core vs. Satellite Strategy

The core-satellite strategy is a popular way to balance stability and growth within your portfolio. The idea is to create a stable “core” of investments that make up the bulk of your portfolio. This core might include broad-market ETFs, blue-chip stocks, or other low-risk assets that provide steady growth and minimise volatility. 

The “satellite” portion, which is a smaller segment of your portfolio, can be invested in higher-risk, higher-reward assets like growth stocks, sector-specific ETFs, or emerging market funds. This approach allows you to maintain a stable foundation while pursuing potential high-growth opportunities.

Dollar-Cost Averaging

Dollar-cost averaging (DCA) is an investment strategy that involves investing a fixed amount of money at regular intervals, regardless of market conditions. By investing consistently, you spread your purchases across different market conditions, which can reduce the impact of short-term market volatility. 

This strategy is especially helpful for new investors as it makes investing a habit and eliminates the pressure of trying to “time the market.” For example, you could invest a set amount each month into a diversified ETF like the S&P 500, which helps you benefit from long-term market growth.

Explore how you can leverage DCA to maximise your returns with our compound interest calculator.

Long-Term Focus

Stock market investments are most effective when approached with a long-term mindset. Historically, the average return of the stock market over several decades has been around 10% per year, though this average includes both bull and bear markets. Long-term investors benefit from the power of compounding returns, where gains generate further gains.

For this reason, it's essential to focus on your long-term goals rather than getting distracted by daily price movements. The best thing you can do after investing is often to avoid the temptation to frequently check your portfolio. Unless you're actively trading, it's better to allow your investments the time they need to grow.

Growth vs. Income Strategy

Decide whether you are more focused on growth or income. A growth-oriented strategy involves investing in companies with high potential for future expansion, which may come with greater risk but also the possibility of significant returns. 

On the other hand, an income-focused strategy prioritises investments that pay regular dividends, such as dividend stocks or REITs. Investors seeking a stable income stream might allocate a larger portion of their portfolio to dividend stocks and bonds, while growth investors might lean towards emerging markets or tech stocks with high growth potential.

Know When to Exit

Part of a good investment strategy is defining clear criteria for when you would sell your investments. This helps take emotion out of the equation when markets get volatile. For example, you might set a rule to sell if a stock drops a certain percentage, or you may decide to exit an investment when it reaches a target price. Having a clear exit strategy in place helps you make rational decisions and protects your portfolio from significant losses.

Step 7: Manage Your Portfolio

Once you've made your initial investments, managing your portfolio becomes an ongoing process. Regularly reviewing your investments, adjusting risk exposure as needed, and knowing when to rebalance are key components of effective portfolio management.

Review Your Portfolio Regularly

It's important to check in on your portfolio periodically, such as every quarter or twice a year. This ensures that your investments are still aligned with your goals, risk tolerance, and time horizon. Life circumstances and financial goals can change, so regular reviews allow you to make adjustments as needed to keep your portfolio on track.

Adjust Risk Exposure

As you approach major life milestones—like retirement or buying a home—you may want to adjust your portfolio to reflect your changing risk tolerance. For example, moving from higher-risk assets like growth stocks to more conservative investments like bonds can help preserve your capital and reduce volatility.

Income Investing by StashAway offers a straightforward way to generate passive income through a globally diversified portfolio of investment-grade and high-yield bonds. Backed by J.P. Morgan Asset Management, it provides a balanced approach with a yield of 4.5% p.a., making it ideal for those seeking steady income without locking in funds. Investors can choose to reinvest or receive flexible payouts, adapting as their needs evolve.

Know When to Rebalance

Over time, market movements may cause your portfolio to drift from its original asset allocation. Rebalancing involves buying or selling assets to bring your portfolio back in line with your target allocation. For instance, if stocks have outperformed and now make up a larger percentage of your portfolio than intended, you may need to sell some stocks and buy bonds to restore balance.

Rebalancing helps maintain your desired risk level and ensures your portfolio stays aligned with your investment strategy.

Best stocks for beginners

For those just starting their investing journey, choosing which stocks to invest in can be intimidating. With thousands of stocks available on major exchanges, it’s easy to feel overwhelmed. However, successful investing doesn’t always require complex strategies. In fact, some of the most renowned investors have succeeded by sticking to the basics.

Many beginners are better off keeping their investments simple by using diversified funds. Warren Buffett, one of the most successful investors of all time, has famously said that for most people, a low-cost S&P 500 ETF is the best investment. This kind of fund provides exposure to around 500 of the largest publicly traded companies in the U.S., giving investors a good mix of industries and reducing the risk associated with individual stock picks.

StashAway offers a flexible and user-friendly platform to invest in NYSE-listed ETFs with low fees starting at just 0.3%. Through StashAway’s Flexible Portfolio, investors can easily gain access to well-diversified ETFs such as the iShares Core S&P 500 ETF (IVV). The platform is built to simplify the process of managing investments while allowing you to customise your strategies to fit your financial goals. To get started,

1. simply open the StashAway app
2. navigate to 'Invest'
3. select 'Create from scratch'
4. add the S&P 500 ETF to your portfolio

Read more: How to Buy and Invest in S&P 500 ETFs in Singapore