How can I Choose an Online Brokerage Platform?
The first thing you need to check is that your chosen broker is able to work with the type of investments you are interested in. Some brokers focus on local investments while others focus on international ones. You can break it down even more than that too.
Another thing to consider is how much you will need to spend on your investment. Not only must you consider the amount you will invest, but the extra fees that come with most if not all brokers. The more you invest, the higher your fees. That being said, some brokers offer better rates than others.
What are Some Products Offered by Online Brokers?
You need to know about both asset classes and financial instruments. Asset classes are the various types of assets that you can trade with, whereas financial instruments are the methods by which you trade those assets.
Forex Trading
Forex trading involves monitoring the shift in value of various currency pairs around the world. A couple of examples are USD and SGD, or EUR and USD. You are basically working the exchange rates of those currencies.
Commodity Trading
Trading commodities includes natural products like gold, oil, agricultural products, and so on. Trading with these requires you to have a decent awareness of global economy, politics, and weather.
Equity Trading
This is where you get to the more well-known form of investment known as shares. Shares involve purchasing a certain portion of stocks for a business or company. You become part-owners with anyone else that also owns shares in the same company. Obviously, the more shares you control, the more you will earn from this investment.
Bond Trading
Bonds basically work as a form of lending. Your bonds will be used by certain people who will repay them with interest. The interest becomes your profit.
Index
Indexes measure the financial value of your portfolio, adjusted for global changes at a quick rate. You can get exposure through Indices by utilizing financial instruments such as CFDs or ETFs.
CFDs
A CFD is a form of contract that goes between you and your broker. It shows the value difference between when you first invested in an asset with that broker and the value it was when sold.
ETFs
An ETF, or Exchange-Traded Fund, is a form of stock, a commodity, or bond that tracks and copies an index. For example, an STI ETF tracks the Strait Times Index.
Futures
Futures are financial contracts, stating that a trader must sell his/her asset at a predetermined date and price. You can trade with these directly and buy them on asset classes including FX, Equities, Indices, etc.
Mutual Funds
Mutual funds are taken from multiple investors and used together for a group of investments. This is one of the safer ways to invest as if one investment goes bad, the others tend to make up for it.
What is the Difference Between Stock CFDs and Share Trading Stocks?
A Stock CFD (Contract for Difference) works as a contract between you and a broker. You do not directly own the assets, however. The contract allows you to speculate price changes and invest based on your guesses. Even though you do not directly own the stocks, you can get away with a smaller deposit on a large investment.
Share Trading stocks work in much the same way except that you directly own the stocks that you invest in, rather than letting the broker handle the ownership. The disadvantage to owning it directly is that you will need a bigger deposit than with a Stock CFD.
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What Types of Investment Brokerage Fees are There?
Commission Fees
A commission fee is a necessary fee that all brokers have. Whenever you make a transaction, you will need to pay the commission fee.
Spreads
Spreads refers to the difference in selling value of your asset. Usually, you should aim for the spread to be positive, earning you a profit. However, there are times when you need to sell something at a lower value to when you bought it, which counts as a fee.
Clearing & Trading Fees
If you have a CDP account, you will need to pay a small fee when using the Central Depository. The fee is usually as little as 0.0325% of your contract value.
What Else Should I Know About Investment Brokerage?
When choosing a broker, you may also want to look into the user interface for the platform they use. Make sure you can figure out how it works and use it on your own. This will prevent your broker from tricking you into doing anything you don’t want to do.
Some brokers also provide research reports to help you keep up with what they are doing. Make sure you can understand these reports so that you know if your broker is doing well or not.
What Markets do You Intend to Trade in?
Each broker has certain advantages in particular markets. It is best that you determine which market you are aiming to invest in so that you can pick a broker that is most suitable.
Do You Know the Difference Between Trading and Investing?
Trading means that you are taking your current assets and trading them for others. You tend to make trades quite often with this method. Investing tends to mean you hold onto your asset for a long period of time while it appreciates.
Have You Researched the Products You Want to Invest in?
Every type of asset is different. It is important that you know what you’re investing in with, even if your broker does most of the trading for you. This way, you can keep up with any potential value fluctuations in the future.
What Exactly is an Online Brokerage?
An investment or online brokerage provides you the means to buy and sell shares through the stock market. Every stock market investor must choose a broker before investing. Some brokers target beginners, so go for those if you are new to stock market investing.
How can I Open a Brokerage Account?
Determine if You are Eligible
So long as you are 18+ and not currently considered bankrupt, you are eligible to invest.
Open a Central Depository Account
Most brokerage firms will help you set up a central depository account, or CDP. This account provides clearing, settlement, and depository facilities for you to work with. You can create the account yourself or get your chosen firm to help you with it.
Choose the Right Broker
The typical aim when choosing an online brokerage is to find one that has a low fee. However, you also need to consider things such as reputation, ease of access to the trading platform, investment options, etc.
Is There a Fee to Opening a Trading Account?
Most online brokerage do not charge a fee for opening a trading account.
How Long Do I Need to Wait for My Account to Get Activated?
Typically, you will need to wait 5-10 business days. The time will vary depending on the platform you choose.
Is There a Local Stock Market in Singapore?
The Singapore exchange or SGX is where you want can trade local company shares.
What is a Good Investment on a Low Budget?
Exchange-traded funds or ETFs are a great way to invest when you don’t have much to work with. ETFs come in tiny bundles and can be both bought and sold very easily.
Will My Money be Insured?
Your money is insured against the possibility of a brokerage firm going bankrupt or collapsing. However your insurance does not cover value losses for your investments.
When Will I be Able to Start Trading?
Once you’ve set up your account and has been activated you will need to make an initial deposit.
How can I Find the Right Online Brokerage for Me?
You first need to consider how much money you have to invest and the type of investment you want to make. Once you’ve found a few platforms that fit your investment objectives, consider any other unique needs you have as well as the reputation of those providers.
What are the Differences Between Cash Upfront Trading and Cash Account Trading?
Cash Upfront Trading is when you pre-fund your account and leave the deposit with your brokerage firm. The firm’s commission rate will be lower with this method since they have direct control of your investment.
Cash account trading can be done with pre-funding the account. However, you can only make trades with the capital in your account. If your funds dip, you won’t be able to trade anymore.
What About CDPs and Custodian Accounts?
As we’ve already mentioned, a CDP account allows you to buy and directly own the stocks you’ve purchased. You will be considered the stockholder in every way. This account also keeps your stocks in a central location so that you can easily trade with other brokerage firms. The only disadvantage is that your fees will be higher than with other accounts.
Custodian accounts leave your bought stocks with the brokerage firm. You are not counted as the owner of those stocks. Instead, they are held in a trust. You won’t need to do much as the brokerage firm will deal with the stock directly, but you will still need to pay minor fees from time to time.
What is Margin Trading?
Margin trading involves borrowing money for a stock investment, rather than buying the stock yourself. You then slowly repay the broker with your profits.
You will typically make a small starting investment when using margin trading with the hopes of it getting bigger as you pay off your loan. This is a far riskier type of investment as you are essentially using someone else’s money.
How Does Margin Trading Work?
The first factor of margin trading is called initial margin. Initial margin is the deposit you need to get started. If your deposit doesn’t reach the initial margin, you will receive a margin call. This occurs when your investment dips too low and ends up below the minimum requirement. When this happens, you must make another deposit to match the initial margin.
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