Investing in the Singapore Exchange is a worthwhile venture for anyone who wants to earn some extra income. However, before you begin to buy and sell securities on the Singapore Exchange, you are required to open a Central Depository Account (CDP). This is an account where your investments will be deposited as you transact on the Singapore Exchange. When you purchase stocks or bonds, these will be deposited in your CDP account and not with the broker who did the transaction. You will be able to monitor your investments through your CDP account. The following are the 3 types of CDP accounts.
This is where the Central Depository Account is owned by a single individual.
This is where two people own a CDP account.
These are CDP accounts which are owned by corporations.
The most common type of Central Depository Account in Singapore is the individual account. However, you are not allowed to own more than one CDP account. Most brokers in Singapore will give you a custodian account where they will store your investments once the transaction is complete. The advantage of this arrangement is that the broker will charge you less in brokerage fees, but you will also have to pay a maintenance fee.
The Singapore Companies Act only recognises those shareholders who have stored their company shares in a Central Depository Account. Therefore, if you buy company shares and fail to store them in a CDP account, then you will not be recognised as a genuine shareholder of the company.
The following are the eligibility requirements that you will need to satisfy before applying for a CDP account.
Opening a Central Depository Account is a simple process which you can complete as an individual. The following are the steps that you need to take.
There are 3 ways of submitting your filled application and attached documents.
As you can see, the above steps are simple. However, you may still not be confident enough to fill in the application yourself. In this case, you are free to engage your broker to do the application for you. He or she will help you to fill in the application form correctly so that the process goes smoothly.
Once you have completed the full application process, there is a waiting period of ten working days, after which you will receive a notification from the Central Depository Account office. As soon as you have opened your CDP account, you can begin to transact on the Singapore Exchange. There are many benefits of trading on the stock exchange, and some of these are given below.
Trading on the Singapore Exchange can provide an extra source of income for you. The advantage of this type of income is that it is passive income and not a fulltime job where you need to be present for eight hours a day. Your broker can do all the transacting while you work elsewhere on a fulltime basis. The profits earned from buying and selling stocks can be very substantial, depending on the changing prices. This extra income can help you to pay off some of your debts or even handle financial emergencies that may come up.
As you trade on the Singapore Exchange, you will have many opportunities to buy the shares of different companies. This will expand your investment base, and you will also be able to spread the risks of your investments so that if one company is not doing well, you will still have several options.
Trading in stocks is not like a fulltime job where your income is fixed. The number of investments that you can take up is limitless, and the potential profit from these investments is also limitless. Therefore, you open yourself up to a deep well of resources when you trade on the Singapore Exchange.
Once you become a shareholder in a company, you also become part of the decision-making team. You will be called upon as a shareholder to give your input concerning management strategies of the company as well as voting. You will have the opportunity to have your voice heard and this will give you a proud sense of ownership.
Stocks tend to be very liquid assets. This is because they can easily be converted into cash. The benefit of this is that they can be included in the calculation of your income level and asset base when you apply for a loan.
In conclusion, a CDP account will give you access to the endless opportunities available on the Singapore Exchange.
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