SINGAPORE - The Singapore Exchange will lower the minimum lot size for its stock market from 1,000 shares to 100 shares starting from Jan 19, as the bourse looks to encourage more retail investors to participate in the market.
The move, first announced in August, came after the benchmark Straits Times Index ended 2014 with a 9.5 per cent total return, which includes dividend, above the 10-year average of 8.7 per cent annually.
Sharing this figure today, SGX executive vice president Chew Sutat hopes to see more investors, including people with no investment experience, exploring the stable and attractive local market.
"We hope the introduction of smaller board lots will help us reach out to investors and encourage them to take full advantage of the many attractive investment opportunities and strong performance of the Singapore market," he said.
But how does a new investor actually start come Monday? Ms Lynn Gaspar, the head of retail investors at SGX, addresses some of the burning questions a first-time investor may have.
What is the first step I need to take?
All transaction goes through brokers, so to start you need to approach in person one of nine retail brokers to set up a trading account - where you execute your buys and sales - and a central depository (CDP) account for custodian purposes. This may take five to 10 days. The broker firm will then assign a representative, who will execute your trade or advise you.
The nine brokers are AmFraser, CIMB, DBS Vickers, DMG & Partners, Lim & Tan, Maybank Kim Eng, OCBC Securities, Philip Capital and UOB Kay Hian.
What sort of administrative fees are involved?
For each transaction, a clearing fee of 0.04 per cent will be charged by SGX. The broker will also charge a commission fee, which ranges from around 0.24 per cent to 0.35 per cent, or a minimum amount between $20 and $25. These fees are charged 3 to 5 days after settlement. GST will also be applied.
I heard I can invest with my CPF funds - how?
If your CPF account has cash above the Minimum Sum, it can be used to invest in a suite of investment products, including stocks. This is managed by CPF, and does not require registration with broker firms. Please visit the CPF website for more details.
How do I actually earn money from investing in stocks?
Two ways. When the shares you hold increase in prices, you can sell them for a capital gain. The companies you invest in may also pay you dividends, often with the option for you to receive it in cash or to convert it to more shares. But please be mindful that not all companies pay out dividends.