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The first step to investing in the financial markets starts from opening a brokerage account. But as for that step before the first step, you’ll have to invest in the best choice of brokerage account for yourself.
Despite the volatility in the markets since the start of COVID-19 last year (or perhaps, thanks to this pandemic), more young investors have started their first foray into investing. In the US market, investors have put in more money into stocks in the first five months of 2021 more than the last 12 years combined. Here in Singapore, there has also been increased interest in investments.
Rather than allowing our idle cash to erode due to inflation in this low interest rate environment, investing these dollars is one way to reduce the opportunity cost and grow our wealth.
To invest in the various financial products available, a brokerage account and CDP account is required. Here’s what you need to know:
- What is a brokerage account and CDP account
- CDP-linked vs custodian account
- Brokerage account fees and charges
- How do you choose a brokerage account that suits you
- Best brokerage accounts to use
What is a brokerage account and CDP account?
A brokerage account is the second step to your investment journey, with the first step being to open a Central Depository (CDP) account.
CDP account: Owned by the SGX, a CDP account provides integrated clearing, settlement and depository services for a wide range of products in the Singapore Securities Market. Your CDP is where your securities are held. To apply, you must be 18 years old and you will require a Singapore bank account. You can open a CDP account by applying online and using MyInfo for quicker application.
Brokerage account: A brokerage account comes with more choices and you can choose from more than 10 different brokerage firms. You will need a brokerage account to buy and sell investment products on the financial market. This includes equities, fixed income products and other trading products.
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CDP-linked vs Custodian account
When choosing a brokerage account, you’ll find that there are generally two different types of accounts: CDP-linked and custodian accounts. Each type of account has its own pros and cons.
CDP-linked account: With a CDP-linked account, the stocks are purchased under your name and will be credited into your CDP account. This means that you own these shares and become a shareholder of the company. This is only applicable for trades made on the SGX.
|Enjoy perks of being a shareholder of the company, such as attending annual general meetings (AGM) and being entitled to voting rights||Higher brokerage fees and minimum commission amount|
|View all your stock holdings in one single CDP account, even if you made the trade using different brokerages. This also allows you to use different brokerages to buy and sell.||Incur additional fees such as|
– Clearing fee: 0.0325%
– SGX access fee: 0.0075%
Custodian account: Your stocks are purchased through a nominee account that is managed by the brokerage firm. This means that the owner of the stock is legally the brokerage house and they hold the stocks on your behalf. If you’re buying overseas stocks, you will require a custodian account.
|Lower brokerage fees and lower minimum commission fee||Do not have the same benefits as shareholders (e.g. attend AGM, enjoy voting rights)|
|More providers available||Incur additional fees|
– Custody fee: This varies based on the brokerage, as some do not charge a custody fee
– Transfer fee: Fees incurred (per counter) when you transfer shares in or out of the custodian account into your CDP account
If you’re a short-term trader, custodian accounts will be more ideal as it saves you from paying higher costs when you make numerous trades. If you’re a long-term investor, there could be more value in getting the stock credited to your CDP.
Brokerage account fees and charges
CDP-linked brokerage accounts
|Provider||Min. commission fee||Trading commissions:<S$50,000||Trading commissions:S$50,000 – S$100,000||Trading commissions: >S$100,000|
|DBS Vickers Cash Upfront Account (only applicable to ‘Buy’ trades)||S$10||0.12%||0.12%||0.12%|
|FSMOne (CDP account linkage available for ‘Sell’ orders only)||S$8.80||S$8.80||S$8.80||S$8.80|
|Lim & Tan Securities||S$25||0.28%||0.22%||0.18%|
|Maybank Kim Eng Securities||S$25||0.275%||0.22%||0.18%|
|Phillip Securities (POEMS)||S$25||0.28%||0.22%||0.18%|
|UOB Kay Hian||S$25||0.275%||0.22%||0.20%|
With S$25 being the common minimum commission fee, what stands out is the low minimum commission fee for DBS Vickers Cash Upfront account and FSMOne, although this is limited specifically to ‘Buy’ and ‘Sell’ orders respectively.
Custodian accounts (based on SG stocks)
This is based on commissions charged for the Singapore market, with assets of less than S$30,000. For customers that have more assets with the brokerage firm, you can enjoy lower commission fees.
|Provider||Min. commission fee||Trading commissions|
|Lim & Tan Securities||S$18||0.18%|
|Maybank Kim Eng||S$10||0.12%|
|moomooo (by Futu Holdings)||S$0.99||0.03%|
|Phillip Securities (POEMS)||No minimum||0.12%|
|SAXO Markets||No minimum||0.08%|
|Standard Chartered Online Trading||S$10||0.20%|
|Tiger Brokers||No minimum||0.08%|
|UOB Kay Hian||S$10||0.12%|
The minimum commission fee of S$10 is common, with the exception of POEMS, Saxo Markets and Tiger Brokers currently offering no minimum commission fees. Trading fees of 0.08% are also the lowest available across all brokerages.
If you are a priority customer of these brokerages, you also enjoy additional perks such as lower commission fees. For example, if you are a Standard Chartered Priority Banking client or a POEMS Privilege client.
Custodian accounts (based on US stocks)
Dabbling in US stocks has gotten cheaper and far more accessible, thanks to the new online brokerages in recent times. Here’s how much (or how little) you’ll have to pay when trading US stocks.
|Provider||Min. commission fee||Trading commissions|
|Interactive Brokers||US$1||US$0.005 per share|
|Lim & Tan Securities||US$20||0.3%|
|Maybank Kim Eng||US$10||0.12%|
|moomooo (by Futu Holdings)||US$0.99||US$0.0049 per share|
|Phillip Securities (POEMS)||No minimum||US$0 for contract gross value ≤ US$2,000 (otherwise from US$5.88)|
|Standard Chartered Online Trading||US$10||0.25%|
|TD Ameritrade||No minimum||Free for US exchange-listed online stock, ETF, and option trades|
|Tiger Brokers||US$1.99 per trade||US$0.01 per share|
|UOB Kay Hian||US$20||0.3%|
Choosing a brokerage account that suits you
With so many brokerage accounts to choose from, how do you pick the one that suits your investment needs? Here are a few factors that you should consider.
Fees: Fees can eat into your investment returns. Most brokerage providers impose a minimum commission fee, with a few rare exceptions. With this minimum fee imposed, it could make more financial sense to be trading a larger amount of money so that the commissions would not take up a significant portion of your capital. Do also keep in mind that the fees could differ depending on the market you trade.
On this note, do not be fooled by zero-commission free trades that might convince users that trading is absolutely free. Do beware of other fees like a per-share settlement fee that some brokerage accounts charge, especially those without a cap. This could potentially put you in a deficit if the price of each share is low. A recent article by The Business Times highlighted a trader who sold his shares for a total of US$5,000, only to realise that he found himself with a US$11,000 deficit because of the high settlement fee that he was charged.
Perks given through promotions: Brokerage providers run promotions from time to time. This can come in the form of commission fee waivers, lowered commissions, vouchers and cash rebates. You can make the most of commission-free promotions by making more transactions during that period.
Products available: What investment products are you planning to use and what does the brokerage provider offer? For example, this could be stocks, bonds, Contracts for Difference (CFD), forex, commodities, futures and more.
Tools and indicators provided: What tools do you frequently use and does the brokerage account provide those tools? This could be technical charting tools, various indicators, drawing capabilities, stock screeners and more.
Market access: Which global exchanges can you access with that provider? This would be important for those looking to trade in overseas markets such as Hong Kong, China and the USA, or if you are looking to trade in specifically in lesser known markets.
Platform interface: Not all apps are created equal. Some are more user friendly than others, being easier to navigate and execute trades. However, this user appeal could also be a largely personal preference. The speed and responsiveness of the app to show prices and execute trades are also important, particularly for traders that trade with short timeframes.
Investment insights: Brokerage accounts also go the distance to value add by providing investment insights such as buy/sell/hold calls, research reports, market outlook commentary, stock ideas and other materials for their clients to use.
Some brokerage accounts also offer demo accounts. These demo accounts are a great way to test out the platform and decide for yourself if their web platform or mobile app is your cup of tea.
Best brokerage accounts
With so many different brokerage accounts available, we have filtered them down into a few important categories.
Best overall and for overseas stocks: Interactive Brokers or ProsperUs
Known for their incredibly low fees, you can use Interactive Brokers (IBKR) to invest globally in a variety of products — stocks, options, futures, currencies, bonds and funds — all from a single integrated account in 135 markets across 33 countries.
There are two different pricing plans, IBKR Lite and IBKR Pro, both of which offer low or zero commission fees. However, IBKR Lite is only offered to direct US clients and any client of an Introducing Broker or if you are an employee of a firm using Employee Track.
Previously, customers could not use IBKR to trade Singapore shares, making IBKR a great option for low-cost trades in overseas markets. However, in July 2020, Interactive Brokers opened their Singapore office and investors will now be able to use IBKR to trade Singapore stocks.
IBKR has also removed their account maintenance fee requirement. Previously, this was US$10 per month, less commission paid that month — a deterring factor for investors that don’t make multiple trades monthly.
Check out our full review of IBKR here.
Meanwhile CGS-CIMB-backed ProsperUs is also one of the best overall brokers out there. Aside from stocks, ProsperUs also offers ETFs, mutual funds, bonds, CFD, FX, and option across markets like the U.S, China, the U.K, Singapore, Australia, Europe, Malaysia, Japan, and more.
There are three account tiers (Rookie, All-Star, Hall of Fame) and the commission fee depends on the account that you hold. However, if you’re trading in the U.S stock market (AMEX, NYSE, NASDAQ), the platform charges a US$5 flat rate commission fee across all tiers. While it’s not the cheapest, the price is still quite competitive if you’re not a frequent trader, and considering that it’s also regulated by the Monetary Authority of Singapore (MAS).
Furthermore, ProsperUs doesn’t charge a platform fee, account maintenance fee, and inactivity fee. There’s also no minimum deposit required.
Best for low fees: moomoo or Tiger Brokers
The newest entrant to the online brokerage space in Singapore, moomoo (by Futu Holdings) first made waves during the pre-launch by offering a free Apple (AAPL) stock with each funded account.
Investors take note – They are now offering users zero commission for US stocks and $0 platform fees for 1 year on US, SG and HK markets. Upon successful account opening, you’ll also get free access to Level 2 Market Data for the US stock market and free access to Level 1 market data in the SG stock market and China A shares market.
If you’re a new Futu SG customer, you stand to have a chance to spin the wheel and receive one free share worth between S$20 to S$1,000 when you successfully deposit S$2,700. This promotion is for new customers that successfully open a Futu SG securities account from now till 30 June 2022.
moomoo charges a commission fee of 0.03%, with a minimum commission fee of US$0.99 (except for commission-free months). Do note that you can only trade US, HK or SG stocks on moomoo and will also incur a platform fee of US$0.005 per share (minimum of S$1 per order).
Having entered the market in 2020, Tiger Brokers continues to offer a low fee of 0.08% for every trade made.For US stocks, Tiger charges US$0.01 per share, with a minimum fee of US$1.99. There is also no inactivity fee or custodian fee, adding to the perks of opening a Tiger Brokers account. You will have to fund your Tiger Brokers account before you can make a trade.
Tiger Brokers is also offering a welcome gift promotion till 1 July 2022 that rewards new customers with 180 days of commission-free trades for U.S. stocks, NYSE AcroBook and 30 Days Reuters Video Card, and one free Grab share when you sign up for an account for the first time.
If you fund S$2,000 into your account, you’ll also receive a S$5 voucher. If you make a deposit of more than S$2,000, you’ll get a S$5 voucher and a chance to draw one free stock valued between S$8 and S$1,200
Check out our full review of Tiger Brokers here.
Best for US markets with no commissions: TD Ameritrade
One of the largest US online broker, TD Ameritrade features an unbeatable US$0 commission on US exchange-listed online stock, ETF, and option trades for all new and existing clients. There is also no platform fee, no inactivity fees and no minimum deposit required.
Beyond commission-free trading, TD Ameritrade Singapore’s trading platform, thinkorswim, was voted the ‘Most Preferred Platform’ at INVEST Fair 2019. They also offer comprehensive investor education and trading tools.
Best for flat fee: FSMOne
If you’re trading on FSMOne, you enjoy just S$8.80 flat processing fee regardless of the size of your trade. Silver account holders also earn 10% additional points on top of the Standard Rewards points. To become a Silver FSMOne account holder, you need to have at least S$100,000 in your FSMOne account
However, do note that this is only applicable for trades in SGX-listed stocks and ETFs. This flat fee also excludes CDP clearing fees and SGX trading fees.
Best for Singapore stocks: DBS Vickers Cash Upfront
Enjoy lower commission fees and a low minimum commission fee of S$10 for buying Singapore stocks with the DBS Vickers Cash Upfront account. This makes it the cheapest brokerage account to use if you want the stocks to be transferred into your CDP account. A pre-funded account, you will have to top up sufficient cash into the account before you can execute a trade.
However, this low commission is only applicable to ‘Buy’ trades. This makes it a great option if you are looking at long-term investments and do not plan on selling the stock. If you do want to sell the stock in the future, you could consider other brokerages such as FSMOne to execute that trade at a low commission fee instead.
Best for promotions: Tiger Brokers or moomoo
Both these brokerages have made their mark in the Singapore brokerage market despite being relatively new here.
The game changer when it comes to promotions, Tiger Brokers were the ones that introduced the idea of collecting coins (much like Shopee), attractive referral gifts, stock vouchers and more.
Currently, Tiger Brokers is also offering a welcome gift promotion that rewards new customers with 180 days of commission-free trades for U.S. stocks, NYSE AcroBook and 30 Days Reuters Video Card, and one free Grab share when you sign up for an account for the first time. Offer is valied till 1 July 2022.
You might have seen moomoo ads on the MRT previously. They’ve also become made a name for themselves by offering a free Apple share upon account funding.
Currently, moomoo is offering users 180 days of commission-free trading on US, SG and HK markets. Additionally, if you successfully deposit funds of S$2,700, you will also receive one SEA Limited share and a S$30 Cash Stock Voucher.
Check out our full review of moomoo here.
For both Tiger Brokers and moomoo, if you’re an existing user, you can still earn other rewards such as stock vouchers through referrals made.
Besides opening a brokerage account, if you’re looking for a diversified investment solution, you can also consider investing with robo-advisors.
Read these next:
Tiger Brokers Review: New Kid On The Block With Low Commissions
moomoo Review: Low Cost Trades And A Free AAPL Share
Interactive Brokers (IBKR) Review: Pros, Cons and Why They’re So Popular
7 Popular Types Of Investment In Singapore (And Tips To Use Them For Optimal Gains)
Best Robo Advisors To Auto-Pilot Your Investments In Singapore
By Ching Sue Mae
A flat white, an adventure-filled travel and a good workout is her fuel. This Manchester United fan enjoys sharing knowledge on personal finance while chasing the dream of financial independence.