Stock Investing in Singapore: A Definitive Guide [2025]

Complete Guide to Investing in Shares in Singapore

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Complete Guide to Investing in Shares in Singapore

Investing in stocks might seem daunting, but once you understand how it works, it’s a powerful way to grow wealth.

I remember being unsure where to start when I first dabbled in the stock market, and like many beginners, I made a few mistakes.

But through experience and research, I’ve learned what really matters when picking stocks – and I’m here to share that with you.

In this post, you’ll learn:

  • What stocks are and how they work
  • The different types of stocks available
  • How to choose the right stock based on key factors
  • The benefits and risks of stock investing

 

If you’re ready to take control of your future and explore the world of stock investing in Singapore, keep reading – you might be surprised at how simple it can be!

What are stocks & how does it work?

Stocks, also known as shares or equities, represent ownership in a company.

When you buy a stock, you purchase a small slice of that company.

This means you own a portion of the business, and if the company does well, you stand to benefit from its success.

Companies sell stocks to generate funds they can use for expanding their business, developing new products, or paying off debt.

In return, investors like you get the potential to make a profit.

If the company’s value goes up, so does the value of your stock.

Plus, some companies pay out dividends – regular payouts based on profits.

So, you not only benefit from the stock’s growth but also get a little extra income along the way.

But stocks aren’t just limited to local companies.

You can also invest in international stocks if you’re feeling adventurous.

How do you earn from investing in stocks?

Capital gains

Capital gains are the profits you make when you sell a stock for more than what you originally paid.

Think of it as flipping a house – you buy at one price and sell at a higher one, pocketing the difference.

However, stock prices fluctuate based on supply and demand, market conditions, and the company’s performance.

Therefore, it’s not guaranteed that the price will always go up – there’s a risk the stock could lose value too.

Dividends

Dividends are another way you can earn from stocks, and they’re essentially a reward companies give to their shareholders.

When a company makes a profit, they might decide to distribute some of it to investors as dividends.

These are usually paid out regularly – quarterly or annually – and can be a great way to generate passive income.

But take note that if companies pay out dividends, that means there’s lesser cash for them to grow – affecting your capital gains.

The trick to determine whether you should pick stocks for capital gains or dividends lies in your investment goals.

If you’re focused on growth, then capital gains should be your goal.

Want dividends instead? Dividend-paying stocks are for you then!

From there, you’ll know what type of stocks to pick.

What are the different types of stocks?

Common stocks vs preferred stocks

Common stocks are the most typical stocks that investors buy.

When you own common stock, you get voting rights, which means you have a say in how the company is run, such as voting on board members or major business decisions.

Most investors prefer common stocks because they offer the potential for high returns through capital gains.

However, with the chance of higher reward comes higher risk.

If the company does well, the value of your shares increases, but if the company struggles, your stock price can plummet.

In the event of a company going bankrupt, common shareholders are last in line to be paid, behind creditors and preferred shareholders.

Preferred stocks, on the other hand, act more like a hybrid between stocks and bonds.

They don’t offer voting rights, but they do come with a fixed dividend, which means you’re more likely to receive a steady income, regardless of how the company’s stock price fluctuates.

Also, in the case of liquidation (if the company goes bust), preferred shareholders are paid before common shareholders.

However, they typically don’t experience the same price appreciation as common stocks, so your capital gains are limited.

Stocks categorised based on market capitalisation

Market capitalisation (or market cap) refers to the total value of a company’s shares on the stock market.

It’s calculated by multiplying the stock price by the total number of shares.

Companies are generally grouped into large-cap, mid-cap, small-cap, and penny stocks based on their market cap.

Large-cap stocks

These are the big players.

Large-cap stocks represent well-established companies with a market capitalisation of over $10 billion.

They tend to be stable, with steady growth and regular dividend payouts, making them ideal for conservative investors.

Large-cap stocks might not grow as quickly as smaller companies, but they offer lower risk, especially during market downturns.

Mid-cap stocks

Mid-cap stocks have market capitalisations between $2 billion and $10 billion.

They offer a balance between growth potential and stability.

Mid-cap stocks are typically companies in their growth phase, which means they have more room to expand compared to large-cap stocks, but they come with slightly more risk.

These companies can still grow significantly, but they’re not as established as large-cap firms.

Small-cap stocks

Small-cap stocks are companies with market capitalisations of $300 million to $2 billion.

These companies are newer or in niche markets and offer significant growth potential.

However, they also come with higher risk as they are more susceptible to market fluctuations and economic downturns.

Penny stocks

Penny stocks are at the bottom of the scale, typically trading for less than $1 per share and with very small market capitalisations.

They can be incredibly volatile and risky because they tend to be associated with newer or struggling companies.

While penny stocks can offer huge returns if the company turns around, they’re also prone to massive losses.

It’s essential to do extensive research before diving into penny stocks, as they’re more speculative than other stocks.

Stocks categorised based on investment characteristics

Blue-chip stocks

Blue-chip stocks are shares of large, established companies with a strong track record of performance.

These are the “safe bets” in the stock market, typically offering stability, reliable returns, and often paying dividends.

Investors view blue-chip stocks as less risky, making them an excellent choice for those looking to grow their wealth steadily over the long term.

In Singapore, blue-chip stocks are often found in the Straits Times Index (STI), which includes companies like DBS, Singtel, and OCBC.

These companies dominate their industries, offering steady growth rather than rapid gains.

While blue-chip stocks may not soar as dramatically as smaller companies, they’re also less likely to see sharp declines during market downturns.

Value stocks

Value stocks are shares currently undervalued by the market, trading at a price lower than their true worth.

These stocks are often found in companies that might have fallen out of favour temporarily, either due to external factors or market mispricing.

I’m particularly a fan of value stocks, especially when stock picking.

This is because value stocks are simpler and require less management in the long term – especially since stock picking is riskier than investing in an ETF.

As someone who doesn’t have the time and doesn’t really want to manage my stock investments actively, value stocks are a great choice for me.

Growth stocks

Growth stocks are the high-flyers of the stock market.

These are shares of companies expected to grow at an above-average rate compared to the rest of the market.

Growth companies typically reinvest their profits into the business rather than paying dividends, focusing on expansion and innovation.

Growth stocks often come from tech or emerging sectors, with much potential for future growth.

However, they also come with higher risk, as the company’s growth prospects may not always materialise as expected.

You might not see immediate returns, but if the company’s growth pans out, the rewards can be substantial.

As I’m still young, I invest in growth stocks via ETFs.

ETFs let me diversify easily while reducing the risks I’m taking.

I can just dollar-cost average into them monthly, benefit from the growth of these companies without worrying about managing them actively.

Dividend stocks

Dividend stocks are ideal for investors focused on generating regular income rather than capital growth.

These stocks are typically from well-established companies that generate consistent profits and distribute a portion of those profits to shareholders as dividends.

Investors prioritising stability and income over risky, high-growth opportunities often flock to dividend stocks.

Companies in sectors like utilities, telecommunications, and real estate are known for offering reliable dividends.

Now, even though there are different types of stocks listed in this post, I must make a note that a stock can be in multiple categories.

For example, you can invest in a common stock of a large-cap company that’s considered a growth stock.

Why should you invest in stocks?

Benefit from economic growth

When you invest in stocks, you’re not just betting on a company – you’re taking advantage of overall economic growth.

As economies expand, companies grow, and when companies grow, their stock prices tend to rise.

This is especially true for sectors tied to essential services like banking, technology, and infrastructure, which benefit from long-term economic trends.

As these companies in these sectors expand their operations, hire more staff, and generate higher revenues, shareholders enjoy capital gains and often higher dividends.

Unlike other investments like bonds, stocks offer higher returns over the long term, especially when economies rise.

Although markets can be volatile in the short term, history shows that stocks generally outperform other asset classes over extended periods.

Essentially, by investing in stocks, you’re positioning yourself to benefit from the world’s economic momentum.

Ease of purchase and trading

Thanks to modern brokerage platforms, buying stocks is more accessible than ever.

In Singapore, platforms like Webull and moomoo allow you to set up a brokerage account and start investing with as little as $5.

You can buy shares with just a few clicks on your phone or computer without complicated paperwork or long waiting periods.

You can also buy and sell stocks whenever the market is open, giving you flexibility and control over your investments.

This ease of trading is a big advantage compared to other investments, like property or bonds, which can take much longer to sell and convert into cash.

Plus, with the rise of online brokerage platforms, transaction fees have become much more affordable.

Some platforms even offer commission-free trades for certain markets, making it easier to grow your investment without worrying about high costs eating into your profits.

Potentially high returns

Historically, stocks have outperformed other asset classes like bonds or savings accounts over the long term.

While it’s true that stock prices can fluctuate in the short run, the overall trend shows that the stock market tends to rise over time.

Investing in strong companies, such as Apple or Tesla, could deliver solid returns if they are held for several years.

By holding onto these stocks, you can enjoy capital gains as their value appreciates.

Of course, risks are involved, but the stock market rewards patience, especially if you’re willing to ride out short-term volatility.

Outpace inflation

Inflation can erode your purchasing power over time, especially if your money is in a low-interest savings account.

In Singapore, inflation typically hovers around 2% to 3% annually, but this can increase depending on global events and economic conditions.

Stock investments, however, offer a way to beat inflation by providing returns that are typically much higher than the inflation rate.

Company ownership

When you buy a stock, you’re becoming part-owner of the company.

This means you have a stake in its success.

As a shareholder, you can vote on important decisions, such as electing board members or approving major business moves.

While you may only own a small fraction of the company, you’re still part of its journey and can benefit directly from its success.

Plus, many companies reward shareholders with dividends, providing you with regular income in addition to any capital gains.

How much do you need to start investing in stocks?

The great thing about investing in stocks today is that you don’t need much money to start.

Thanks to innovations like fractional trading, you can begin with as little as $5.

This means you can buy a portion of a share rather than purchasing a whole one.

This makes it incredibly easy for beginners to invest in high-priced stocks, even with limited capital.

I recommend using Webull if you’re investing in US stocks as it allows for fractional trading and has zero commission fees.

If you’re comfortable buying full shares, the cost to start investing will depend on the price of the individual stocks you want to buy.

Stock prices can range widely – from affordable penny stocks to expensive blue-chip stocks like DBS or Apple.

For instance, if you want to invest in DBS Bank, one of Singapore’s largest and most stable companies, you must buy the full share price, currently over S$30 per share.

However, if you’re more interested in smaller, lesser-known companies, you may find shares priced under S$1.

When investing in Singaporean stocks through the Singapore Exchange (SGX), stocks are typically traded in lots of 100 shares.

To calculate how much you need, use this formula below:

Unit price of each share x 100 shares

So, if a stock is priced at S$5 per share, you must purchase 100 shares at once, making the minimum investment S$500.

Some brokerages may also charge a minimum fee for each transaction (typically around S$10 to S$25), so it’s good to remember when planning how much to invest.

How much does it cost to invest in stocks?

The fees and costs associated with investing in stocks can vary depending on the stock exchange you are trading on.

If you’re investing in Singapore-listed stocks through the Singapore Exchange (SGX), there are specific fees involved:

  • Clearing Fee: This is a standard charge set by the exchange. On SGX, it’s typically 0.0325% of the transaction value.
  • Trading Fee: SGX also imposes a 0.0075% trading fee.

 

These fees apply regardless of which brokerage you use, and they’re charged every time you buy or sell stocks.

If you’re investing in US stocks or other international markets, the exchange fees will differ.

Typically, international markets may include foreign exchange fees when converting your Singapore dollars into the local currency (e.g., USD).

Your brokerage also plays a big role in how much it costs to invest in stocks.

The typical costs you can expect from brokerages are commission fees, which in Singapore range from S$10 to S$25 per trade for traditional brokerages.

Custodian fees for managing international stocks can also apply, typically ranging from S$2 to S$10 monthly.

I suggest reading our post on the best brokerage accounts.

I created categories based on the type of investor/trader you are, and selected the best ones accordingly.

But investing in stocks does come with disadvantages too…

Market volatility

Stock prices can fluctuate wildly in response to economic events, political developments, or company-specific news.

A sudden downturn in the market can lead to significant drops in the value of your investments.

For example, during the COVID-19 pandemic, global stock markets, including the Singapore Exchange (SGX), experienced sharp declines.

Volatility is part of the stock market, and while it can lead to opportunities, it also means you could experience substantial swings in the value of your investments.

Potential for loss

Unlike more stable investments like fixed deposits or bonds, stocks offer no guarantees.

You can make profits, but there’s always the risk of losing money.

If the company you’ve invested in underperforms, its stock price may drop, sometimes to the point where you lose your entire investment.

This risk is especially pronounced with small-cap or penny stocks, which can be more volatile and prone to more significant swings in value.

Even big companies aren’t immune – unexpected economic downturns, scandals, or poor management decisions can lead to sharp declines in stock prices.

It’s crucial to remember that investing in stocks comes with the risk of gains and losses, and there’s no way to predict the market with certainty.

Emotional decision-making

Investing in stocks can stir your emotions, and emotional decisions often lead to mistakes.

When markets rise, it’s easy to get caught up in the excitement and buy into stocks at inflated prices.

Conversely, during a market downturn, fear and panic can drive you to sell at the worst possible time.

Successful investing requires staying calm and making rational decisions, not letting emotions dictate your actions.

I recommend going through our free beginner investor course.

I go through with you how to select investments and manage them.

With a proper understanding of what you’re doing, you’ll remove emotions from investing.

Requires time and research

Investing in stocks isn’t something you can do on autopilot.

It requires time, research, and careful analysis to make informed decisions.

You must keep up with company performance, economic trends, and market news to understand when to buy or sell.

If you’re investing in growth stocks or smaller companies, the research required is even higher, as these companies may be more volatile or not as well established.

For those who aren’t willing or able to commit the time and effort needed for thorough research, investing in stocks can be risky.

A lack of understanding or preparedness can lead to poor decisions and missed opportunities.

How do I choose a stock?

Understand the business & competitive position

Before you invest in any stock, you should fully understand what the company does.

This means knowing its products, services, industry, and how it makes money.

It’s also important to consider the company’s competitive position – that is, how well it stands against its competitors.

Does it have a unique product or service? Is it a market leader?

Companies that dominate their industries, like DBS Bank in Singapore’s banking sector or Singtel in telecommunications, tend to perform well over the long term.

Look for companies that have a clear and sustainable competitive advantage.

This could be in the form of strong branding, innovative products, efficient operations, or a large market share.

You should also consider the industry’s outlook.

Is the industry expected to grow, or is it facing challenges like regulation or technological disruption?

Industries poised for growth, such as technology or renewable energy, often provide better opportunities for investors looking for long-term gains.

Strong financials

You want to invest in businesses with strong financials, which means they generate consistent profits, have manageable debt levels, and use their resources efficiently.

Key financial indicators include revenue growth, profit margins, and manageable debt levels to avoid financial strain during downturns.

Strong cash flow reflects financial stability, allowing for investments and dividends.

Additionally, reviewing a company’s balance sheet provides insight into its assets and liabilities, while a lower price-to-earnings (P/E) ratio compared to peers may suggest the stock is undervalued and offers growth potential.

Growth potential

Growth potential refers to the company’s ability to expand its revenue, profits, and market share in the future.

When a company grows, its stock price tends to rise, providing capital gains for investors.

But how do you assess a company’s growth potential?

Look at industry trends – is the company operating in a sector that is expected to expand?

Another good indicator is revenue growth.

Consistent increases in revenue over the years suggest that the company is expanding, gaining customers, and building a larger market share.

Valuation

Valuation refers to the price of a stock compared to the company’s actual worth.

It’s crucial to ensure you’re not overpaying for a stock, even if it has strong growth potential.

Stocks can sometimes become overvalued when there’s too much hype around them, leading investors to pay more than they should.

To assess stock valuation, consider key metrics like the Price-to-Earnings (P/E) ratio, which compares stock price to earnings.

A lower P/E relative to peers may indicate undervaluation.

The Price-to-Book (P/B) ratio compares stock price to book value, with a lower ratio suggesting potential undervaluation.

The PEG ratio adjusts the P/E for growth, and a PEG under 1 may signal that a stock is undervalued based on its growth potential.

Risks

Every stock comes with risks, and understanding these risks helps you make more informed decisions.

Common risks include market risk, which affects stock prices due to external factors like economic downturns or political instability.

Industry-specific risk pertains to the volatility within specific sectors, such as technology and biotech, which can experience significant price fluctuations.

Lastly, company-specific risk relates to issues directly affecting a company, such as poor management, high debt, or declining market share.

Should I pick individual stocks or choose ETFs/unit trusts?

Deciding between individual stocks and ETFs (Exchange-Traded Funds) or unit trusts depends on your investment goals, risk tolerance, and how hands-on you want to be.

If you’re confident in selecting stocks and willing to accept more risk for potential higher returns, go for individual stocks.

Conversely, if you prefer a diversified, lower-risk strategy and less active management, ETFs or unit trusts may be more suitable.

Many investors like myself successfully blend both approaches, investing in stocks they believe in while using ETFs or unit trusts for broader market exposure, tailoring their portfolios to fit their risk tolerance and goals.

How do I buy stocks in Singapore?

If you’re ready to start investing in stocks in Singapore, the process is easier than you might think.

One of the simplest ways for beginners to get started is by using an online brokerage platform like Webull Singapore, which is known for its user-friendly interface, low fees, and access to both local and international markets.

If you’re unsure, check out our detailed guide on how to buy stocks in Singapore.

Conclusion

Investing in stocks is one of the most effective ways to grow your wealth over time, whether you’re aiming for capital appreciation or steady dividend income.

While there are risks, careful research, and a clear strategy can help you navigate the ups and downs of the market.

Remember, the key to successful investing is patience, understanding your risk tolerance, and maintaining a diversified portfolio.

Whether you’re choosing individual stocks or ETFs, always align your investments with your long-term financial goals.

If you’re feeling unsure or confused about where to start, don’t hesitate to get a second opinion.

Talking to an unbiased financial advisor can help ensure you’re making the right decisions for your unique circumstances.

Feel free to connect with one of our financial advisor partners for a free, no-pressure chat.

They’re here to help you navigate the nuances of investing and get you started on your investment journey.

Happy investing!

Picture of Firdaus Syazwani
Firdaus Syazwani
In 1999, Firdaus's mother bought an endowment plan from an insurance agent to gift him $20,000. However, after 20 years of paying premiums, Firdaus discovered that the policy was actually a whole life plan with a sum assured of $20,000, and they didn't receive any money back. This experience inspired Firdaus to create dollarbureau.com, so that others won't face the same problem of being misled or not understanding what they are purchasing – which he sees as a is a huge problem in the industry.

Disclaimer: Each article written obtained its information from reliable sources and should be purely used for informational purposes only. The information provided by Dollar Bureau and its affiliated parties is not meant to be construed as financial advice. Dollar Bureau shall not be held liable for any inaccuracies, mistakes, omissions, and losses incurred should you act upon any information listed on this website. We recommend readers to seek financial planning advice from qualified financial advisors. 

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