Like we’ve said before, this column is written especially for people who are new to financial planning. And just like learning martial arts, we start from Ground Zero. On and off, Aunty Scroogey gets asked by friends and colleagues at the supermarket on procedure for opening a share trading account, so this is what we will go through today.
Mainly, the important thing is to decide on a brokerage firm. The 3 local banks each have their own brokerage arm, eg DBS Vickers http://www.dbsvonline.com/English/index.asp, UOB Kay Hian http://www.uobkayhian.com.sg/ and OCBC Securities http://www.iocbc.com/. If you maintain your operating bank account with any of these 3 banks, you might wish to consider using its brokerage arm. Apart from these, there are also other independent brokers such as Phillip Securities http://www.poems.com.sg/.
You will also need a Central Depository http://www.cdp.com.sg/main/index.shtml account (or CDP for short) for clearing your trades. When you are at the brokerage firm to open your account, your broker will open a CDP account for you at the same time, if you do not already have one. The brokerage firm will also allocate daily buying and selling limits based on your income level. For example, if your limit is $5,000, the total value (not the number of shares) of your purchase per day shall not exceed that amount.
One very important thing that you might wish to consider when opening your share trading account is to link the share account to your bank account so as to facilitate settlement via GIRO. After doing a trade of shares denominated in Singapore dollars, you need not follow up with payment manually if your account has been linked. Otherwise, you would need to make a point to remember to send in a cheque or do an internet banking/ATM transfer to pay for the shares you have purchased. Settlement period is typically 3 days. If the due date (T+3) falls on a Singapore holiday, settlement will be made on the following market day. If shares are not settled within the settlement period, they might be forced sold.
At time of opening your share trading account, you might also wish to consider applying for an online log-in. Brokerage charges for DIY online trading are usually lower than calling your broker on the phone to do a trade. For details of fees and charges, refer to websites of brokerage firms mentioned above. You should also go through a list of their FAQs to have a better idea of the share trading procedure.
By the time you walk out of the brokerage firm, you are almost done. Log-in and password will be mailed to you separately and your account will be ready in a few days’ time.
Opening a share trading account is the easy part. The difficult part is deciding on what shares to buy, when to buy and at what price. That is another topic for another day.