Like many working adults, at some point of our lives, we will most likely dabble in investment vehicles such as stocks, saving bonds, REITs and hundreds of other investment options available out there. This is typically how it plays out: you have some disposable income, and you've heard from your friends about all the money you can make from buying and selling stocks or bonds.
For most of us, it can be a daunting task and a confusing first time experience, and we often wonder, how do we learn how to buy our first stock?
Here are some questions I faced when learning how to purchase my first stock.
1. Which brokerage should I choose?
Perhaps this is familiar to most of us - which brokerage should we choose to trade on? When you have finally decided that you want to start investing in the stock market, your enthusiasm quickly gets dampen away by the number of brokerage firms out there, all of which provides different commission fee structures. Firms that charge a lower fee come at a higher risk, which again, you need to take into consideration when you are choosing your brokerage firm.
Here's a quick comparison of the common fee structure of the brokerage firms in Singapore:
The reason why SAXO and Standard Chartered are able to charge a lower fee is because they hold your stocks in custodian accounts. What this means is that these firms own the stocks on your behalf, which gives them certain rights over stocks that you have bought.
2. How do I determine which stock should I go for?
Once you have decided which brokerage firm to trade with, there is the big question of which stock should you purchase. While the internet is full of resources, it can sometime be overwhelming and full of speculations and commentaries from other traders. While it could be easy for me to find basic information about a particular company, it can be a tedious job to find other detailed information about the company, and more importantly, how the company stacks up against his peers in the industry.
Which is why SGX's recently launched StockFacts is a valuable resource platform for new retail investors like me.
StockFacts by SGX is a platform that allows you to search and view any company's detailed information such as revenue numbers, EBITDA, Dividends as well as a transparent look into the company's balance sheet, cash flow, and the various ratios. StockFacts also allows you to compare companies side by side and see their relative performance.
3. The fundamentals and the basic terminologies for understanding stocks
Which brings me to my next point, for first time retail investors like me, we might not be that financially savvy to understand the various terminologies used to reflect the financial health of a company. What exactly does "EBITDA Margin" means? Or "normalised diluted EPS"?
StockFacts by SGX solves this problem by putting in the necessary description for all the terminology that may be confusing for us as an user so that we make informed investing decisions.
4. How do I monitor stock performance?
Once you have purchased your stocks and have a sizeable portfolio, it is important for you to easily monitor the stock performances. One easy way of doing so would be to use a stock screener such as StockFacts. The best part about StockFacts is that it is free to use and that you do not even need any login. Simply hop over to the StockFacts website and start using the screener.
5. How do I sort company performances via industry indicators?
For me, I like to also see which companies perform best via various criteria such as total revenue, price over earning ratios, dividend yield, and other industry indicators. To make it easy for newbie retail investors like me, it should be easy for me to find which company has the highest dividend yield with a simple click, or it should be easy for me to find which company has the lowest P/E ratio.
Which is why I am currently using StockFact's screening feature to discover some of the stocks that are suitable for my risk appetite. Its screening feature allows users to easily filter companies by various indicators as well as alpha factors, such as a company's valuation, price momentum, volatility et cetera.
6. How do I find the best performing companies by industry?
Perhaps another equally important challenge that I face is- how do I view company performance by industry? As I am familiar with Internet companies, I want to be able to find the best performing internet companies easily. StockFacts allows me to do exactly that.
Do you face similar problems when you first decide to venture into the capital market?
SGX is organising a SGX Carnival called My First Stock Carnival at Ngee Ann City on the 7th and 8th of May 2016, where you can meet experts and find out more about investing. You can also like SGX's Facebook page to find out more.
I will see you there!
This article is done in collaboration with SGX