Which investment brokerage in Singapore is best? Here's how to decide

So you’ve read up enough about how to start investing and you’ve triple-checked your emergency fund, and you’re finally ready to rake it in on the stock market! But now what?

The next step is to pick an investment brokerage which allows you to buy your first shares. Easier said than done, though. From bank brokerages like DBS Vickers and UOB KayHian, to independent brokerages like Saxo Markets and POEMS, the sheer number of brokerages can be overwhelming.

So how do you decide which investment brokerage is best for you?

Here are 3 main factors you need to look out for when choosing the best brokerage firm for you:

• Commission fees: How much it costs to buy or sell your investments
• Account type: Whether it’s a CDP or custodian account
• Trading platform: How user-friendly the brokerage is

1. Investment brokerage commission fees

Investment brokerage firms charge a commission fee for every transaction on the stock market. When you buy shares, you get charged. When you sell shares, you also get charged.

There are two parts to the commission: The fee itself (a percentage of your transaction) and the minimum fee (a dollar amount). Example:

• You’re buying $3,000 worth of Singtel shares
• The brokerage charges 0.1 per cent commission, minimum fee of $10
• You end up paying $10 instead of $3 on your shares
• If/when you sell your shares, you pay another $10

If you’re the kind of investor to just park a big lump sum for decades, commission fees won’t make much of a difference to you. But if you invest frequently, expect to be charged commission fees multiple times. So it’s important to pick one that charges affordable rates.

You can compare online investment brokerages at our MoneySmart page.

Right now, the two cheapest investment brokerages on the market are SAXO and POEMS. Both charge only 0.08 per cent commission on Singapore stocks, with no minimum fee for a limited time.

Going back to the $3,000 Singtel shares example, the commission is only $2.40. That’s super cheap compared to bank brokerages like DBS Vickers, which charge around 0.25 per cent per trade, subject to a minimum of up to $25.

2. CDP account vs custodian account

Wondering whether to go for POEMS or SAXO? Well, one of the key differences is the “Stock Holding Type” or the type of account they use for Singapore stocks.

POEMS has a Central Depository or CDP account, while SAXO’s is a custodian account. What’s the difference?

• CDP account: Stocks are held under your name, in your own personal CDP account. You have full shareholder rights such as attending AGMs (annual general meetings). If the brokerage goes bankrupt, your ownership of the shares will not be affected.
• Custodian account: The brokerage owns the stocks on your behalf, so the stocks are technically not in your name. Sounds risky, but MAS regulates the financial industry very tightly in Singapore, and most brokerages keep custodian accounts separate so that they will not be affected financially.

If a CDP account appeals to you more, the big name brokerages typically offer them:

ALSO READ: How to buy US stocks in Singapore (2020): 3 best investment brokerages

3. Investment trading platform

Finally, you’d want to check out the investment brokerage’s online trading platform — either a website and/or mobile apps. These let you check stock prices and invest on the go.

Naturally, you would want to pick an investment broker with an accessible, user-friendly, and non-buggy online trading platform. If you can’t invest online with ease, then what is even the point? Might as well join the queue at Phillip Capital.

So before you commit to a specific investment broker, make sure you test out their platform to see if it’s something you’d be happy using time and again.

If it’s buggy, doesn’t display the right information, and doesn’t have the tools that you need — forget it, there are other fish in the sea.

In case you need it: Here’s how to open a CDP Account

If you have decided on an investment brokerage that lets you own stocks via CDP, then you’ll need to set up a CDP securities account.

To be eligible to open an account, you need to be at least 18 years old and NOT an un-discharged bankrupt. You can either do this directly with The Central Depository (it’s a very straightforward process) or create a sub-account with a “Depository Agent” – a stockbroking firm, trust company or bank nominee.

Basically, while you can deal with as many different brokerage firms as you want, you only need to open one CDP securities account to deposit all the stocks you’ve bought.

Bonus: Best investment brokerages for US stocks

Apart from letting you buy and sell shares on SGX, all the investment brokerages we talked about also extend the same services in major overseas stock exchanges.

Commission fees and minimums are different for each stock market, and you can totally use one investment brokerage for SG stocks and an entirely different investment brokerage for US stocks.

Here are the cheapest brokerages for US stocks:

If you’re trading in overseas stock markets, the whole CDP vs custodian account thing doesn’t matter. The Central Depository is only for trades on SGX, and is not an option for overseas stocks. So custodian accounts are the only option.

ALSO READ: Should you trust your broker for stock recommendations?

This article was first published in MoneySmart.