Getting Started with Investing

I heard about investing from the people I know, watched about investing on the media, and read about investing on the newspapers.  But what exactly is investing and how does it actually impact our lives? To find out more about investing, I worked for a company specializing in financial education, read books and attended seminars to satiate my curiosity.

The first step is always the hardest because you got to learn everything from scratch – the technical jargons, the investing process, rules and regulations, the parties involved, etc. Hence, to make it easier for those who have yet taken their first step, here is what you need to know or do to get started.

Singapore Exchange Ltd (SGX)

The SGX is an investment holding company located in Singapore and provides different services related to securities and derivatives trading and others. Basically, it functions as a platform (e.g. like Taobao or Qoo10), by regulating and allowing companies to receive cash flows by selling shares to investors, and allow investors to choose and invest their money from the pool of companies.

Central Depository Pte Limited (CDP)

The CDP is a wholly owned subsidiary of SGX. It provides integrated clearing, settlement and depository facilities in the Singapore Securities Market, including both equities and fixed income instruments. In short, CDP functions just like a bank where it safeguards the stock certificates you own in your account (electronically) instead of cash. Before you can start investing, you have to open a CDP account either by visiting CDP or submitting an online application. To find out on how to submit an online application or the contact details of CDP, please click here.

Brokerage Firms

There are many brokerage firms in Singapore. They have agents known as brokers or remisiers (similar to insurance or property agents) who help companies and investors to facilitate the stock buying and selling process. For every transaction made, a small fee is charged as commission. A brokerage account is also required before you can start investing. To see the list of brokerage firms and their fees, you can click here to find out more.

Educating Yourself

Good job on opening your accounts and now it is time to buy some stocks! However, how do you select the good companies from the huge pool of companies? This is where education comes into the picture. There are many financial education providers in the market and personally I like the ones provided by SGX Academy. The first seminar you must attend is “The Basics of Investing” as the speaker will talk about the basic things you need to know before you start investing.

After this, you will have to read books to find out more about the various investment products and strategies and select those which are suitable for you. You should also invest in yourself by attending courses or joining investment clubs.

Here is an example of the buying/selling process:

  • You buy or sell stocks via a brokerage firm’s platform
  • The transaction is approved and the stock certificate is deposited into (if you buy) or deducted from (if you sell) your CDP account
  • The money is deducted from (if you buy) or deposited into (if you sell) your bank account

Summary

SGX acts as a regulator and a platform for companies to sell their shares to acquire cash flow, and for investors to invest their money into companies to acquire returns.

CDP records and safeguards the stock certificates you bought in your CDP account.

Brokerage Firms help to facilitate the buying and selling process.

Education is important as it allows you to make sound investment decisions so that you can earn money through proper investing.