Passive Income for Life

This post is to get one started in investing in equities or stocks.

The greatest deterrent to any new investor is taking the first step into the unknown. I remember the times before i invested in anything, there were thoughts that the stock market is a dangerous place where you can go bankrupt. Whilst the truth is not far from that, it is necessary to educate oneself to mitigate that risk and know the steps and processes in which investing takes place.

3 Things you would need to have before you can start investing:

1. Local Bank Account – where you keep your money
2. Brokerage Account – where you buy and sell shares
3. CDP (Central Depositary) Account – where you keep your shares

To help people get started, here are some simple steps you can take to make your first stock purchase:

1. Open a CDP account
   There needs to be an independent party to track all the share purchases you make as there can be many brokerage accounts you own. CDP holds the shares like a bank holding your money.
2. Open a brokerage account
   There are many brokerages in Singapore like DBS Vickers, LimTan, UOB KayHian etc. A brokerage is the intermediate party in which they do the transaction of buying and selling of shares.
3. Link your Brokerage account with your Bank account
   Payment needs to be made when share is bought. Linking your account will allow you to pay for the shares via EPS (electronic payment for shares). Do note that you have to specify whether it is manual or by GIRO. And do ensure you have sufficient cash.
4. Take note of your Trading limit
   A trading limit is given based on your income level. This ensures you do not overtrade beyond your means and protects you and the brokerage.
   
5. Buy and Sell Shares
   You can buy shares via the internet platform if you specified so. Or else you could trade via your broker by calling him/her. Costs are lower if trading is done over the internet. Shares are bought and sold by specifying the price (within 10 bids spread) and the number of lots required. A lot is 1000 shares.

The whole process for registering and getting all the administration done is about 1 month tops.

All it takes is to make the first step to clear all these admin details and you are set to “own companies”.

Let me know what other details/questions you might have in the comments below.