5 Simple Steps on How to Start Investing in Singapore

If you live in Singapore, you’re a resident in one of the world’s top financial centres. What does that mean, exactly?

We hear all the talk of Singapore “staying competitive” and being a natural magnet for family offices in the Asian region. Does that mean anyone can start investing?

Well, if we take away all the usual jargon on why Singapore is so great as a base for wealth management, it can be great for the everyday investor. But how do you get started?

Stock markets offer you the chance to own pieces of real businesses that operate globally.

The awesome thing about Singapore is that buying and selling these stocks is so easy given the simplified tax structure here (at least if you’re not American!).

So, here are five quick steps on how to start investing if you live in Singapore.

1. Open a brokerage account

Before you even think about being able to buy anything, you first need a brokerage account. What’s that, you say?

Think of it as a storage area for your stocks, exchange-traded funds (ETFs) or real estate investment trusts (REITs).

You then pay a fee (commission) to be able to access new investments or sell your existing investments on a stock exchange.

These commissions used to be sky high – and still are in some cases – but many have come down and you’ll want to shop around and do some research to see what works for you.

Probably the worst brokerages to use are the ones run by the three big Singapore banks; DBS Vickers, UOB Kay Hian, and OCBC Securities.

That’s because they charge ridiculous commissions and are super inflexible. For example, all three charge a minimum of S$25 for anyone wanting to sell their holdings and a minimum percentage that is high by today’s standards (0.25-0.28%).

They also charge a range of “handling fees”, in the spirit of taking a slice of your investment cake. So, bottom line? Avoid these three AT ALL COSTS.

Look to platforms that are digital, easy to use and low cost. There are plenty out there in Singapore which charge low commissions and give you the ability access various stock markets.

2. Understand currency conversion costs

We live in Singapore, which is small. Unsurprisingly, it’s not exactly the biggest stock market in the world.

So while we should have some Singapore exposure, logic dictates that we should have a lot of our investments outside Singapore.

Where’s that likely to be then? Given its massive size, the US stock market. What currency do stocks in the US trade in? US dollars (USD), of course.

We live in a country that uses the Singapore dollar (SGD) so we’ll need to convert those SGDs into USDs if we want to buy stocks in the US.

A lot of brokerages make profits by charging you an unfavourable exchange rate when you exchange money in your brokerage account.

So, ideally, you’ll want to find a broker that gives you the best exchange rate versus the “spot rate” – which is the official exchange rate.

You can find the spot rate for any currency pairing on currency conversion websites like xe.com or oanda.com.

3. Fill out the W-8 BEN form

Forms. Forms. Forms. They’re dull, I know. But thankfully, you only have to fill out just one if you want to buy US stocks.

Uncle Sam requires anyone foreign, who wants to purchase US shares, to fill out a W-8 BEN.

This is a pretty standard declaration form that you can get from your brokerage.

All you have to basically declare is “I’m not American” so that the US Internal Revenue Service (IRS) can document it for tax reporting purposes.

Once you’ve filled this out and returned it, you’re good to go in terms of buying US-listed investments.

4. Decide which stock markets you want to invest in

As long as you have the US and Singapore stock markets available to you, that should be good. But, you may also want to diversify away from those two markets.

Ensuring the broker you choose has sufficient access to various markets at least allows you the flexibility to purchase stocks or ETFs that are listed in other countries.

Other major stock markets globally include Hong Kong, China, Australia, Japan, Canada, the UK, Germany, and the Netherlands.

Understanding what level of exposure you want to these markets can help you decide what you want to invest in outside of Singapore and the US.

5. Fund your account responsibly

So, you’re ready to invest. But that also means you need to figure out how much you want to invest per month.

That’s the best way of investing so you can completely remove the “market timing” aspect of putting your hard-earned money into the market.

Understand what percentage of your monthly disposable income you want to put towards investing

Remember that “disposable” means the amount left after the Singapore tax authorities have taken their cut on your salary.

Usually, the rule of thumb is for 20% to go towards savings and investments. Although you should also have six months’ worth of expenses in cold, hard cash!

That’s to make sure you don’t need to sell out of anything should you suddenly need money for, say, a medical emergency or unforeseen event – like losing your job.

Get ready to invest for the long term

So, you’re now set to invest from Singapore. The great thing is it’s now relatively easy to set up a brokerage account and start investing.

What’s more, the options on offer are so much more than even a decade ago. So, if you’re living in Singapore and always been wanting to invest – but freaking out about how to get started – just stick to these top five tips.