You’ve heard about investing in stocks, but don’t know where to start? If you want to invest in stocks, this article explains how to get started.
Continue reading on.
Step 1: Decide on what stocks you want to invest in
The first step to buying stocks is to know what stocks you want to invest in. If your goal is to make money, then the best way to do this is by investing in a diversified portfolio of stocks that will give you the highest chance of making profits.
If you are looking for high-risk and high-reward potential, then individual stocks may be right for you. These types of investments can lead to huge returns.
However, they also have higher risks.
You’ll need to research each company carefully before deciding which ones to invest in.
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- 5 Best Singapore Growth Stocks to Buy Now
- 11 Best Dividend Stocks in Singapore
- 7 Undervalued Stocks in Singapore
An ETF (Exchange-Traded Fund) is an investment fund that tracks an index or a group of stocks.
For example, there are ETFs that track the S&P 500 stock market index, the Dow Jones Industrial Average, the Russell 2000, and many others.
The advantage of these funds is that they often provide exposure to more companies than you could ever hope to individually own, so it makes sense to create an ETF portfolio.
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A unit trust is similar to an ETF. Investing in unit trusts gives you access to professional money managers who specialise in picking stocks and other assets.
They usually charge annual management fees based on the total value of all your holdings.
Step 2: Find out about the stocks you want to invest
You should consider your risk tolerance when choosing between individual stocks, ETFs, and unit trusts.
A low-risk investor would probably benefit from using ETFs or unit trusts because they allow them to spread their risk over hundreds of different companies.
On the other hand, if you are willing to take on some risk, then you might prefer to use individual stocks.
Understanding the type of investor you are and how long you plan to stay invested is crucial to decide on this step.
Step 3: Research the company thoroughly
After you have gathered all the necessary information, it’s time to analyse the company. Before you decide whether or not to invest, you must understand everything about the company.
What does the company produce? How profitable is it? What kind of return on investment does it offer? Are there any major issues at the moment?
What is the company’ s business model? Is it focused on one particular industry, or does it operate across multiple industries? Does it focus on selling products directly to customers, or does it sell through distributors or resellers?
What is the competition doing? Do competitors have similar offerings, or are they offering something unique?
Does the company have any debt? If yes, how much? What is the interest rate on the debt?
How stable is the company? Has it had any major problems recently? What is the outlook for the future?
Do you think the company will continue growing? Why or why not?
Is the company undervalued? If so, why?
A good place to start is with the annual report that the company has filed. This document contains all kinds of useful information, such as the company’s revenue, profit margin, assets, liabilities, capital structure, and so on.
Another great source of information is the company’s website. Here, you’ll find press releases, financial data, and other important documents.
Before you decide whether or now to invest, you must be able to answer these questions yourself.
Step 4: Open an investment brokerage account
Once you know what you want to do, it’s finally time to open an investment brokerage account.
Brokerage accounts can be opened online. When opening an account, make sure you get a broker who offers the best service possible.
We’ve listed the best brokerage accounts in Singapore here.
The first thing you need to do is fill out a form that asks for personal details like name, address, contact number, date of birth, and email address.
You also need to provide proof of identity, which includes a passport or driver’s license.
Step 5: Fund your investment brokerage account
Now that you have an account, it’s up to you to fund it.
Brokerage accounts usually provide different ways to fund your account, so you can select whichever is most convenient for you.
The easiest way to do this is by transferring money from your bank account – which can take anywhere between an hour to a few days depending on your bank and the broker.
The process is simple enough, but it can be quite expensive depending on the fees charged and the type of account offered.
Step 6: Make your decision
Now that you know everything about the company, have a funded brokerage account, it’s finally time to make your final decision.
You can either go ahead and buy shares in the company, or you can wait until the price drops lower before buying.
Waiting for the price to drop
An option is to wait until the price falls below a certain level before buying. Once this happens, you’ll be able to purchase the shares at a discounted price.
This method works best for small investors who don’t mind taking on more risk than they normally would as you might not get the opportunity to invest at the lowest prices.
It also works well if you’re looking to diversify your portfolio.
By waiting for prices to drop, you lower the overall investment amount in your portfolio while having a diversified one.
However, it’s important to note that waiting for the price to fall could mean losing out on an opportunity to buy the stock. In addition, you won’t be able to control when the price starts falling.
Buying the stocks
You could also decide to buy the stock immediately. In this case, you’ll need to understand the different types of market orders available.
The different types are :
Limit Order – This order will only execute once the price reaches the set limit. This is great if you want to purchase a stock at a specific price only.
Market Order – This order will automatically buy or sell all shares at the current market price. The risk of this order is that you may end up paying too much for the stock. This is due to the spread (the difference between bid and ask) being higher than usual as prices are always changing.
If you’re new to investing, we recommend using Limit Orders because they give you better control over your investments.
Step 7: Check that the stock is in your account
It’s now time to check whether the stock has been added to your account.
To do this, simply log into your online trading platform and look for the ticker symbol of the stock. Brokerage accounts will usually show “Position” if you already have the stock in holdings.
Otherwise, check your account wallet. You will usually see your stock reflected in there.
Good brokerage accounts will send you an SMS or email once you’ve made your purchase, so make sure to check there too!
Investing in stocks is a risky business, but with proper research and planning, you can reap the benefits of investing in companies.
Remember to always check the background of the company before investing. Also, take your time to learn about the risks involved in the stock market.
And most importantly, never lose sight of why you started investing in the first place – to build wealth
Frequently Asked Questions
There are 3 ways to receive dividends from your stocks:
Receive them through direct deposit into your bank account, via cheque, or in your trading account.
Some brokers offer this service directly to their clients. It means that you don’t have to worry about sending cheques to yourself as the broker takes care of these details.
This option is more common among retail investors. If you choose this method, you’ll receive the dividend checks in the mail.
In your trading account
If your broker offers this, your dividends will be paid out in your trading account. Check out your account wallet to see if the amount is credited.
For stocks listed on SGX-listed stocks, the minimum number of shares is 100. For SGX-listed ETFs, the minimum number of shares is 1. For stocks listed in the U.S. Markets, the minimum number of shares is 1.
If you don’t want to go through the hassle of using a broker, you can buy shares in Singapore either through a financial advisor or a robo advisor.
The best Singapore stocks are listed here: https://dollarbureau.com/blog/best-singapore-growth-stocks/
Best healthcare stocks in Singapore: https://dollarbureau.com/blog/best-healthcare-stocks-singapore/
Best undervalued stocks in Singapore: https://dollarbureau.com/blog/undervalued-stocks-singapore/
Best Singapore dividend stocks: https://dollarbureau.com/blog/best-dividend-stocks-singapore/