Guide to the Types of Investments Available in Singapore

Stocks? Options? Bonds? Futures? This guide explores these investment tools and more that can help you build your investment portfolio.

ValueChampion Editorial Team

by ValueChampion Editorial Team on May 28, 2024

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Confused About Investing?

The world of investing can be scary, with so many technical jargons that can make your head spin. From exchange-traded funds (ETFs) and options to stocks and bonds, there is a huge selection of investment tools out there, and these can get confusing even to an experienced trader.

Whether you are a risk-averse beginner or an investing veteran looking to diversify your portfolio further, this article breaks down all the different types of investments available in Singapore for you.

Table of Content

Types of Investments in Singapore

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Stocks

This is probably the most well-known form of investment. A stock represents a share or a stake in a publicly-traded company. A company sells a share to the public as a way to raise funds to finance operations and initiatives that will help the business grow.

For example, Apple or Tesla sell a small percentage of their company in the form of a share in the US market.

Some people buy shares so that they can have a legitimate stake in the company, control the business’ direction, and receive dividends. This is where the term ‘shareholders’ comes from. However, to become a shareholder, one needs to hold a large stake in the company, about around 20%. This can amount to millions of dollars.

For most people they buy stocks so that they can sell them at a higher price or hold them long-term for dividends.

Read Also: A Basic Guide to Stocks

Compare Online Brokerages in SingaporeFind Out More

Bonds

Bonds are like a money lending contract that you obtain at a brokerage where you are the lender. Through bonds, you can lend your money to a private or government entity for a certain period of time. While your money is on loan you get consistent interest payments. After the bond matures, you receive your principal sum.

In Singapore there are many types of bonds for you to check out. Singapore Savings Bonds (SSBs) are long term bonds with a step-up interest, meaning the longer you invest the more interest you will receive. It is also fully backed by the Singapore Government.

Another choice for those investing in sustainability and green practices is the Singapore Sovereign Green Bond.

Mutual Funds

A mutual fund pools money from many investors and makes money by trading in stocks. These are typically managed by a fund manager who decides where the money goes and what trades are going to be made.

Mutual funds are a popular choice as they allow investors to have a diverse portfolio without spending too much time or energy in the actual trading.

There are a few types of mutual funds out there but we will expand on three: ETFs, Index Funds, and Hedge Funds.

ETFs

ETFs or exchange-traded funds are a form of a passively managed fund. ETFs are a basket of assets that can be tracked and sold on the market like any other stock. Typically ETFs track a particular index (or market), but can also group and track assets differently.

ETFs that track indexes are called index funds. The fund manager of an index fund essentially follows the natural progression of the market index by selling stocks of companies that are losing share value and buying those that are gaining value.

For example, the Straits Time Index has companies like ComfortDelGro, DBS, and CapitaLand as a few of their top enterprises. As the market moves, with shares losing and gaining value, the index fund manager follows these movements and trades accordingly.

Compare Best Online Brokerages for ETF & Unit Trust Trading in SingaporeFind Out More

Hedge Funds

Hedge funds are another type of mutual fund. However, hedge funds fall under the actively managed category of mutual funds. This means that the fund manager actively makes trading decisions designed to generate returns beyond the market standard. These are typically available to accredited investors, have a large initial investment (think in the millions), and may even impose net-worth requirements.

Singapore based hedge funds like Vanda Global Fund and Quantedge Capital manage billions of dollars worth of assets and trade in global markets actively.

Options

Options are a tricky way of trading stocks, making them slightly more complicated. Let’s break them down into two types of options: a call option and a put option.

A call option is an option that gives an investor the right to buy something. For example, you buy a S$500 stock with an upfront payment of S$5 set to expire a month from now. Within this month, you can exercise the choice to sell this stock as though you own it. If the market price of this stock increases to S$600, you make a S$95 profit. If you don’t sell the stock before the deadline, you default the premium which is S$5 in this case.

A similar mechanism works for a put option, which gives the seller a right to sell. Options are a way for people to control risk or protect against severe risk like in the event of a stock price massively falling.

Futures

A future is an agreement between a buyer and a seller on the price of the stock at a predetermined date and time. Once that predetermined date and time is reached, the buyer must buy and the seller must sell that stock for the agreed amount, regardless of what the market price is.

REITs

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REITs stands for Real Estate Investment Trusts. These are companies that own income-generating real estate. By investing in REITs you can obtain the benefits of earning from real estate without having to source, buy, maintain or finance any properties yourself.

CDs

Certificates of Deposit (CDs) is a form of investment where you can place your money in a bank or credit union and gain interest as time goes on. This interest payment is usually reinvested, leading to a compounding effect.

However, do note that CDs are not very liquid. The duration of the term that needs to be fulfilled and you will need to pay an additional fee if you withdraw prematurely. Sometimes this fee can be large, making it difficult for you to retrieve your money without incurring high additional costs.

Annuities

Annuities are contracts between a buyer and an insurance company. A buyer pays either a lump-sum upfront or makes a series of payments, after which they are entitled to receive regular disbursements. For more information on the types of annuities, refer to this guide.

Robo-Advisors

A robo-advisor is exactly like a financial advisor, except, well, it’s not human. Based entirely on artificial intelligence, robo-advisors provide automated investment and trading services. There are so many kinds of robo-advisors out there. Some specialise in strategies optimised using modern portfolio theory and others are even created to mimic the trades of hedge funds.

Compare Robo Advisors in SingaporeFind Out More

Other Types of Investment

Private Equity Funds: This is another kind of mutual fund but these funds usually pool money so as to obtain a controlling stake in an operating company. They usually target companies in booming industries or start-ups with growing potential.

Commodities: Purchasing commodities is essentially buying tangible resources that appreciate in value due to their scarcity. Items like gold and oil fall under this category.

Investment Terms You Should Know

A retail investor trading options online
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Trading on Margin

Margin interest is a loan interest rate between you and your broker if you do not have the funds to purchase a stock right now.

For example, you may be interested in a stock that costs S$1,000 but do not have that kind of money to invest at the moment. You can trade on a margin by reaching an agreement with your brokerage.

So perhaps they agree to let you trade with a 10% margin, meaning you can buy a S$1,000 stock for S$100. The remaining S$900, you need to pay eventually with an interest rate.

Bull / Bear Market

A bull market is a term used to describe any market where prices of stocks are showing an upward trend, indicating that the value of the market is going to rise.

On the other hand, a bear market illustrates a declining trend of falling stock prices. The strict definition is a price decrease of 20% or more. This is the opposite of a bull market.

Dividends

Dividends are payments made by the company to its shareholders. These typically come from the company’s earnings and provide incentive for investors to purchase a stock, even though the stock price may not be rising.

However, not all companies choose to pay out dividends as this decision is up to the board of directors. For instance, Tesla does not pay dividends to stakeholders, instead choosing to use profits for other business purposes.

Getting Started

You now know briefly about the many types of investments available and want to get started. The next step is to pick a trading platform to get started.

Depending on your investment needs and financial situation, here are a few trading platforms to consider.

Tiger Brokers

Tiger Brokers

Tiger Brokers is one of the cheapest online brokers on the market.


Tiger Brokers


Pros

  • Low cost trading fees
  • Cheap trades on the HKSE
  • Easy to use platform

Cons

  • Limited market access
More Details

Consider this if you are looking for a cheap online brokerage with relatively broad market access

If you’re looking for large market access to trade in China, HK, US, Australia, and Singapore, but also one of the cheapest commission rates on the market, Tiger Brokers is a great option. It offers stocks, options, bonds, and many more types of investment. Tiger Brokers is also an all inclusive digital platform with both mobile and desktop applications at your fingertips.

uSMART

Trade US stocks for as little as S$1 in fees per trade if you are an eligible client in Singapore.
New users can also trade US stock options for zero commission.
Valid until 30 Jun 2024.

uSMART

With its innovative SMART features, extensive learning affordances, and some of the cheapest commission fee rates for the SG and HK markets, uSMART is the perfect option for new and fresh investors.


uSMART


Pros

  • Lowest commision fees for SG and HK markets
  • SMART features for convenient trading process
  • Educational features to guide new investors

Cons

  • Does not support mutual funds or bonds trading
More Details

Consider this if you are looking for an online brokerage with specially-curated investing content for beginner investors

If you’re a true novice, uSMART is a great beginner-friendly brokerage to start your investing journey. uSMART also houses features like Buy-Low and Sell-High that make trading intuitive and easy.

Conclusion

Now that you are familiar with most investing types such as stocks, ETFs, and REITs as well as know some of the platforms you can use, you are prepared to make your first investment..

However, it is important to note that all investments, even the relatively stable ones, carry a risk. You may lose money and your investments may depreciate. Nevertheless, it is equally as important to recognize the benefits of investing, and exercise caution when doing so.

 

Ready to invest? Check out our roundups of the best online brokerages and best roboadvisors in the market today!

Compare Robo Advisors in SingaporeFind Out More

Compare Online Brokerages in SingaporeFind Out More

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