March 29, 2009
YOUR PERSONAL ADVISER: FINANCE
Opening a stock trading account
Q I am a 19-year-old national serviceman looking to invest my savings in the stock market. But from what I know, the age limit for registering an account with the Central Depository (CDP) is 21 years old. Is there any alternative way of trading? The stocks are now at their low and I feel it will be profitable to invest in blue-chip stocks for the long term. I also have some money parked in a foreign currency deposit account. However, the currency is suffering a loss and I am wondering if I should switch the funds to recommended safe havens like the yen or US dollar.
A In the past, the minimum age to open a stock brokerage account locally and to invest in Singapore shares was 21 years old.
But, since March 9, the CDP has accepted account openings for applicants aged 18 and above.
If you wish to invest in some blue-chip stocks for long-term growth but do not have sufficient funds to build a diversified investment portfolio, you may want to consider using instruments like exchange-traded funds (ETFs).
ETFs are designed to replicate as closely as possible the performance of indexes like the Straits Times Index. The ETF fund manager does so by investing in the stocks following the same weightings as the respective index. Like unit trusts, an ETF is made up of a portfolio of around 30 or more stocks, allowing an investor to diversify company-specific risks very effectively.
With regard to your foreign currency deposit, the extreme volatility in forex rates is a reminder of the risks involved with forex trading.
There is no free lunch in exploiting the interest rate differential between high- and low-interest currencies. From the financial planning angle, we advise our clients to hold onto foreign currency deposits only if they have a future need for the currency, such as for tertiary education overseas. If you do not foresee having a need in the near future for the foreign currency you are holding, you may want to gradually reduce your exposure to it.