For most people who are interested in investing, deciding to open a stock brokerage account is typically the first step to take in the investment journey. However, with the numerous stock brokerage firms available out there, selecting one over another could prove a daunting task.
Here is a simple guide on what to take note of when opening a stock brokerage account and the questions you should be asking.
5 Key Considerations before opening Stock Brokerage Account
Whenever you buy or sell shares, you have to pay a commission fee for the brokerage company to transact on your behalf. Bear in mind that this is a two-way charge. So the more you trade, the higher this cost.
Left unchecked, these small, little costs can eat into your profits (or increase your losses) extensively. Luckily, due to the transparency and competitiveness of the brokerage industry, most of the rates offered are quite similar in recent years.
You should check out the fees from the different brokerage houses below:
Singapore – http://sgx.i3investor.com/jsp/hti/brokers.jsp
Malaysia – http://klse.i3investor.com/jsp/hti/brokers.jsp
Australia – http://au.i3investor.com/jsp/hti/brokers.jsp
Brokerage Firm Reputation
Your brokerage firm defaulting is definitely an issue you DO NOT WANT to be concerned about. One clear example is http://www.mfglobal.com/. It gone bankrupt in 2011 and with it contains huge funds deposited in the name of customer accounts.
As such, one simple guideline is to choose to open stock trading accounts with the big banks such as CIMB, UOB and OCBC. Apart from being well-capitalized, they have many branches across Asia and thus, tend to provide more analyst reports in this region too.
Gone are the days that people have to call in to execute their stock orders. In today’s context, being able to use your phones or tablets to conduct and check on trades is one of the key features one should look for.
In addition to the above, stock investors would generally look for other user-friendly or customisable features such as:
- Technical Charting tools like candle-sticks and stop-loss features
- Stock Screener comprising of multiple criteria
- Ease of use of the trading platform
Due to the hefty costs of implementing such features in the trading platforms, they are usually found in more of the established regional players including Maybank-KimEng (Maybank acquired Kim Eng some time back), CIMB Securities and UOB Kayhian.
When it comes to investing your hard-earned money, I think the last thing you want is to have a sucky level of support. Just imagine the frustration you get when your trade doesn’t go through at the last minute (especially when buying IPO shares at the onset of its launch)!
I once had a very bad experience during my early days of investing. I purchased a stock and used Electronic Payment for Shares (EPS) to pay for the shares. However, on the day of cash settlement (T+3 days), I was told that the total amount is short of a few dollars (I didn’t xfr enough to cover the commission).
And as a result, my shares will be force-sold if I can’t top-up by the end of the day. Unfortunately, I was overseas at that time and can only watched in vain as my position was liquidated without my control.
This incident made me realize 2 important things. Firstly, how you pay/receive cash for your shares is crucial and largely pivots my decision to use OCBC Securities as I use OCBC as my preferred bank.
Secondly, I feel that it is essential to have someone whom we can approach asap when we have queries, whether technical or otherwise. While most of the brokerage firms provide this service, the level of service received depends very much on the trading representative that is assigned to you too.
While people mostly stick with buying of stocks in the past, the variety of products has mushroomed significantly over the years. Some examples include Forex, Indices and even monthly investment plans which enable customers to choose and invest in stocks starting from as little as $100 monthly.
In this case, you probably do not want to be in a situation where you have to manage multiple trading accounts simply because each of these platforms do not have all the products that you would want to trade in.
And on another note, if you wish to buy overseas stocks as well, you should check that the platform allows trading across a diverse range of asset classes and geographical markets.
Conclusion: How to choose the Right Stock Brokerage Firm
We believe there is no one right answer when it comes to choosing the optimal stocks trading account. After all, it really depends on what you intend to do at the end of the day.
“What? That just makes it more confusing for me!”, exclaimed budding stock investors.
Don’t worry! I wouldn’t be leaving you in the lurch and second-guessing on the suitable stock brokerage for you. In fact, I have done some research and compiled a simple list of stock brokerages which I think fits the bill for that intended purpose.
Without further ado, let’s look at the table below:
|What you want to do||Suitable Brokerage Firm|
|Make more frequent trades||Interactive Brokers “IB” (cheapest but need min. deposit of 10K); Standard Chartered (no min. rule removed but still relatively cheaper compared to others)|
|User-Friendly Trading Platform||CIMB (tip-top stock screener), Phillip Securities (one of the established firms around)|
|Support||Depends greatly on Remisier, Local Banks preferred|
|Wide Geographical Coverage||Big Regional Players like Maybank, UOB Kay Hian, CIMB, IG Group etc.|
|Suite of Products||IG Group, IB, CityIndex, UOB Kay Hian (first broker to launch Diamond Trading! Gold investing too)|
Choosing a brokerage account is rather similar to picking stocks as you probably want to stick with them over the long run due to the cumbersome process of transferring your funds or portfolio to and fro.
On the other hand, if you’ve just started out investing, it is advisable to open several stock brokerage accounts and decide which would best fit your needs. It is important that you are comfortable trading in your preferred stock brokerage firm since the last thing you want is to dread investing due to the dislike of your trading platform.