FAQ on Investing In Singapore

(A) How can I get started investing in shares?

Firstly, ask yourself do you have $100? Open a stock trading account with a registered broker is usually free in Singapore. Singapore Stock Exchange( SGX Singapore) has a lot of penny stocks. As long as you have a minimum of $100, and open an account. You are half way there.
Next, ask yourself if you are equipped with investing knowledge? What is your circle of competence? Do you understand the business that you are investing in? Do you know how the business that you are investing in generates profits? Cayden Chang, the founder of Value Investing Academy, always advises the graduates to NOT INVEST in something that YOU DO NOT KNOW. If you are not familiar with a business, either a) Learn more about it before investing in it, or b) do not invest in that business.
Finally, be fearful when people are greedy, and be greedy when people are fearful.

As a human being, it is very easy for us to get caught up in the “herd mentality” and knee jerk reaction that other traders do when Mr. Market aka the stock exchange has a mood swing. However, as value investors, we need to remember that, to invest in a stock, we should not be monitoring the stock price on a daily basis. Instead, we, as investors, should do our due diligence and homework to buy a good business that will be working for you (in form of collecting dividend or capital gain over the long run) for a good price.

(B) What is the Singapore Stock Exchange? (SGX Singapore)?

SGX Singapore (ticker symbol: S68) is an investment holding company located in Singapore and provides different services related to securities and derivatives trading. SGX is also a member of World Federation of Exchange.

SGX was formed on 1 December 1999 as a holding company. The share capital of some former exchange companies, namely the Stock Exchange of Singapore (SES), Singapore International Monetary Exchange (Simex) and Securities Clearing and Computer Services Pte Ltd (SCCS), were cancelled and new shares issued in these companies were fully paid up by SGX. In this way, all assets previously owned by these three companies were transferred to SGX, and the shareholders previously holding shares in SES, Simex and SCCS received newly issued SGX shares.

On 23 November 2000, SGX became the second exchange in Asia-Pacific to be listed via a public offer.

As of February 2017, there are 754 listed companies (excluding GDRs, Hedge Funds and Debt Securities) on the Singapore Exchange with a market capitalisation of SGD 977.097 billion (roughly USD 700 billion).

(C) SG REITs – Finding a good SG REITs to invest in

Simply put, REITs (Real Estate Investment Trusts) are investment vehicles that allow you to own real estate without a need for huge capital upfront.

REITs are traded in a stock exchange just like common stocks. Before you can invest in local REITs, you will need 2 accounts:

SGX CDP account
Brokerage account

A good REIT in Singapore should have the following characteristics:

Not overvalued

Find out the intrinsic value of the REIT. Price is what you pay, Value is what you get.

A good outlook

REITs in different industries will have different outlooks, depending on the macro trend.
For example, an increase in computer cloud services demand will lead to an increase in the need for data storage, which translates to an increase in demand for data centres. This will result in an increase in the income yield of datacentre REITs that are involved in these specific industries.

Good growth prospects

Good REITs must continue grow its net income on a year-on-year basis.
Growth can be in two forms:

a) Organic growth – can be found via increase in rental, occupancy or capital recycling.

b) Inorganic growth – through acquisition, either local or overseas.

Good ROI (return of investment %) and dividend yield

ROI, for REITs, compares the REIT’s income (such as rental income) against its underlying assets value. A REIT with a good ROI indicates that the REIT is able to generate a relatively higher income vs its peers. The higher the ROI the better, as this indicate that the management or property’s ability to command higher rental income.
Dividend yield for REITS average at 6.5%.

Low gearing ratio (debt / total asset)

Typically, REITS use debt to finance the acquisition of new properties. This can expose the investors to interest rate risk. When a REIT has a high gearing ratio (aka, the REIT overuses debts to finance its operations), there will be less earnings to distribute back to investors as the interest expense coverage becoming higher.

Click here to find out more about REITs in Singapore.

(D) The Singapore stock market: What types of stocks are there ?

This is a list of the types of stocks available on the SGX, taken from the SGX sector heat-map.

This heat-map is shows how each sector is performing. GREEN numbers means positive performance, while RED numbers means negative performance.

(E) What is Value Investing and how did Value Investing evolve?

Value investing is not a new idea. Value investing arose from the work of Columbia Business School professor Benjamin Graham – although he never used the term .

He developed his ideas about successful investing during the Great Depression and co-wrote, with Columbia colleague David Dodd, the classic 1934 text, Security Analysis. He followed this 15 years later with The Intelligent Investor.

Click on the link Secrets of Warren Buffett (What is Value Investing Part 1 of 4) to read more about Benjamin Graham’s

These two books set out the foundations of what is now known as value investing.

Click here download a copy of our “The Intelligent Value Investing Notes”.

(F) What is Value Investing ?

Value investing is an investment approach that relies on buying securities below their intrinsic values. There are two main concepts; one is the Intrinsic Value and the other is Margin of Safety.

Value Investors own a share in the underlying businesses, not stocks. Value investors look at the fundamentals of the company that the stock represents.

Intrinsic value is the value of the underlying business – if we are talking about stocks – that can be calculated through carefully analyzing the business looking at all aspects of it. If there is an intrinsic value exists for a company then there is a price tag we can put on its shares as well. Value investing is looking to buy shares well below its intrinsic value.

Margin of Safety is the difference between the buying price of a stock and its intrinsic value. Value investors are insisting on buying stocks well below their intrinsic value, where the margin of safety is 20%-30% or even more. This concepts is protecting them from poor decisions and market downturns. It is also providing a room for error, when calculating the intrinsic value.

Value investors wait for this golden opportunity to buy the stocks at a discounted price.They know the company has future growth potential. They then sell their stock when the market price is overvalued, earning them a nice big profit.

(G) What was Warren Buffett’s Approach?

He started out using Graham’s methods and was very successful but eventually, Buffett would start investing in the way that people would most closely associate him with in modern times – investing in great businesses that can earn great returns on capital over the long term. But, that would be a development that would take the introduction of a certain Charlie Munger and Philip Fisher, two people who would really reshape the way Buffett thought about investing.

Click here to read more

Secrets of Warren Buffett (What is Value Investing Part 2 of 4)

Secrets of Warren Buffett (What is Value Investing Part 3 of 4)

Secrets of Warren Buffett (What is Value Investing Part 4 of 4)

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value – Warren Buffett”

(H) Can Value Investing Really Work In Singapore?

Value investing, at its most basic core, is the act of figuring out the real economic value of a business. A decision to invest would then hinge on whether the market price of the business is sufficiently lower than its real value. That’s why shares with low valuations, as a group, tend to fare better than shares with high valuations – with low valuations; chances are good that a business’s economic value is higher than its market price.

Emotions are part and parcel of human nature – we cannot take it away from us. And so, as long as the markets are dominated by human actions, there’ll always be room for value investing to work its magic.

Click here to read more: Can Value Investing Really in Singapore?

(I) Types of Value Investing In Singapore

Value Investing was not a popular investing methodology in Singapore many years back and it’s only about 3 – 4 years ago when it becomes a topic people talk about.

What is the best investing method? If you have asked yourself these questions before, click here to read this article types-of-value-investing-in-singapore

(J) Is Value Investing right for me?

There are different styles of Value Investing, but there will be at least one style that will fit your needs.

If you have zero Finance knowledge and wish to learn the Warren Buffet’s Style of Investing, This is the Place for You.

You will be taught the 8 step-by-step VIA Funnel to identify true gems from the rest of the stones. You can make money from the stock market, if you have a proven methodology of filtering the gems from the thousands of stones within any stock exchange
You will be trained a Set of 5-Step Formula when to enter the stock market and buy these stocks.
VIA offers 4 Proven Ways to shortlist potential stocks.
VIA provides 3 Exit Points and this completes the blueprint of an intelligent investor
Furthermore, the large community and support here is simply amazing. You get to network with people of the same interest with different backgrounds! Would you like to accelerate your training on investments?

Click here to join our Free Value Investing Masterclass In Singapore

(K) How Options Work ? A Basic Guide

An option, a derivative, whose price is derived from price of another underlying financial instrument, such as a stock, gives investors the option, but not the obligation, to buy or sell something at a predetermined price and date

Options are divided into two types: a PUT option or a CALL option.

In the US stock exchanges, individual investors are allowed to sell and/or buy options for both PUT and CALL options. However, in the Singapore stock exchange (SGX), individual investors are not allowed to sell options; individual investors on the SGX can only buy options.

Click here to accelerate your learning on options

(L) What is the difference between options trading/options selling ?

Warren Buffett once said that selling options is the safest way of creating wealth. However, what is the difference between options trading and options selling?

(1) Option Trading

Options trading, in layman terms is when a trader (not a value investor for sure!) buys and sells options in large volumes and in a short span of time to try and profit on the speculation of share price movements. Traders do not have the intention to hold the stock for long term. Instead, they will often use technical analysis and/or speculation to buy and sell options, or sometimes in a combination of the 2, and hope that by the end of the expiration date the combined trades will net him a profit. The trader hopes that all the premiums he paid for buying options will be offset by large share price changes, through which the trader can profit from.

In essence, for a trader, it is always about the short-term share price movement of a stock rather than the underlying value of a business behind that stock.

An option trader would rather pay the premium to the option seller for an option to act like a “guarantee” that they are able to sell the stock at a higher price when the share price drops in the market. In short, option traders think that they have limited costs (the premium paid) but with very large returns (if the share price changes drastically, the traders can exercise the option, requiring the seller to buy/sell the stock at a guarantee price). However, this type of buying and selling is very similar to speculation and gambling!

(2) Option Selling

Option selling is, on the other hand, based on an entirely different concept. For value investing, options are sold with the intent of buying the stock at a good price. If you recall, an option is a contract which conveys to its holder the right, but not the obligation, to buy (calls) or sell (puts) shares of the underlying security at a specified price on or before a given date. This right is guaranteed by the seller of the option. Hence, the option seller, having sold this “right” to the option buyer, has to fulfil the obligation if the buyer choses to exercise it.

The option seller receives the option premium in return for selling this right to the option buyer. In the Mind Kinesis Value Investing Program, we are taught to invest in good stocks for the long term, but only to buy the stocks when they are at a cheap price. Options selling allows a value investor to constantly earn money through premiums while waiting for the price of the stock to drop below the intrinsic value (the price that a value investor willing to pay for).

Earning premiums can be pretty lucrative. A guideline taught in the Value Investing Academy was that a 1% return from an option premium can be considered good. A 1% return every month translates to a 12% return in 1 year! This is much higher than what the banks are currently offering as a return on their interest.

In essence, option selling allows the value investor to buy a stock at the price they willing to pay (below the intrinsic value) while generating a consistent flow of cash.

By doing so, option selling is actually a low risk and consistent way of generating cash flow.

To your dreams,

Mind Kinesis Research Team

Click here for our Free Value Investing Guidebook :

In this guidebook, you will discover..

✅How you can get started with little or no experience (pg.1)
✅How you can start investing with as little as $4/day (pg.15)
✅How to generate consistent, automatic passive income of more than 9% and more per year (pg.16)
✅ Step by step method for you to start investing today (pg.7)
✅ What does the world’s 2nd richest man recommend to invest in? (pg.2)
✅ The secret to consistent returns in the long run (pg. 13)