Ok, so you know the importance of investing for your retirement or to beat inflation, had a hand or two with Poems, OCBC, or one of the local brokerages to buy into Singapore stock exchange (SGX), but feel that Singapore’s market doesnt really have liquidity or the ability to make good money through equities (the prices are very stable).
Like many fellow Singaporeans, you start to realize that the US exchanges are way better as the companies listed are world class, there is growth potential and so much more liquidity in the market there. This is especially true, after you read up or join stock investment forums both locally or globally.
Now that we established the need and want to trade in the US market, the million dollar question is where to start, which brokerage should you be using and how do you get the ROI on your SGD to USD funds.
Lets start with a simple basics to trading US equities, what you need to know.
- Know what is your capital outlay, trading on the Nasdaq, S&P or Dow requires you to change Singapore dollars to US dollars. This means you need to monitor the exchange rates or at least know how much your funds can purchase in USD.
- Watch those exchange rate fees and spread, to change USD to SGD, most of us will either transfer SGD to the local brokerage firms, then accept their exchange rates and change to USD or do an exchange or TT via your internet banking dashboard and then transfer it into your brokerage account. Its good to keep an eye on this as the spread and fees for this service can be rather high.
- W8BEN form declaration, Basic for non US based citizens. Before you can trade the US markets, you need to sign the declaration form to declare you arent a US citizen so that you dont get charged or taxed.
- Trading Hours, Since our time zones are different, its important to know that in the US market trades at 9.30pm our time and if there is day light savings it could change an hour earlier or later. Here’s an article talking more about the opening hours. US public holidays 2020, good for reference to see when the market is open
- Knowing the lot size, when I first tried US stocks, I always assumed that I need to buy 1 lot, during my time SGX dictated 1 lot to be 1000 shares, which it has since moved to 100, similar to the US. However do not that trading in the US market allows you to buy just 1 share, yes 1. although you dont really want to do that due to transaction fees.
- Dividend Withholding Tax, When purchasing stocks for dividend yields, dont be fooled by the high yields. You need to take a 30% haircut as all dividend payout has a 30% taken out as tax for now US citizens. This is something that you need to know before planning dividend stocks as your portfolio especially if you are looking to live off dividends only. Very important.
Now that we’ve covered the basics, the question is which stock brokerage you should be look to get.
- Poems – One of the popular brokers in Singapore. I started with Poems, got to know it through IT shows and popup kiosks at shopping centers, was one of those sucked in to signup.
- Lim and Tan – Another popular local brokerage in Singapore. Similar acquisition tactics with Poems, one good thing is you can trade and earn NTUC link points with them. So next time go supermarket have rebate🙂
- iOCBC – OCBC’s trading arm, used by many as well. Can trade all types of shares. But traditional setup plus the UI is very old like the other local brokerages.
- UOB Kay Hian – UOB’s trading arm, I don’t have much experience here but I have friends that have private bankers to help them execute. I think the UI should be similar 90s based web interface, but I could be wrong. (If you have screenshots do share with me)
- SCB custodian account – You don’t own the stocks here, its housed under SCB account. The benefit here is transaction fees are low, but support can be meh…
- Interactive Brokers – US based, listed brokerage. Very innovative, low transaction fees. Currently no local presence but based in HK and AU as well.
- Think of Swim – Part of TD Ameritrade, its also a Us based brokerage with presence in Singapore. Fees are reasonable, good UI and access to historical market data to run simulations.
These are just a few brokerages that I know. You might want to check them out and compare the fees and features before trading.
My personal favorite to trading US shares and why?
Interactive Brokers is the brokerage I champion and recommend to all my friends or every one looking to start their trading journey. The main reason is the transaction fees are very very low and cheap. So trading of shares can be done is smaller quantities with the fees not affecting the overall investment. Funding the account is also great, as you can transfer SGD then buy USD or any currency via the spot price and just pay a small transaction fee. This is one of the biggest plus points. Lend out shares you own for an interest. You can also earn money on the shares you already own as interactive brokers will lend parts of your stocks to margin investors. This is part of the yield program. Dividend reinvestment, you can automatically set the system to reinvest the dividends to grow your existing portfolio.
Do note, if you have less than 100K USD stocks or cash in the account, interactive brokers do charge a $10 monthly fee. This can be offset from the commission you made any stock purchase. Also do note that they are delays in the pricing unless you pay for extra service. But for normal investors like myself, the Pros outweight the Cons which is why I feel support Interactive Brokers so much.
Hope this helps, the content stated here are my personal opinion. Please do your own research before doing anything