Do investments always have to happen via a bank? I'm really new to investing and read that one can at the very least start out with ETFs - but does that happen via a bank or just via CDP? - Seedly
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Anonymous

Asked on 12 Jan 2020

Do investments always have to happen via a bank? I'm really new to investing and read that one can at the very least start out with ETFs - but does that happen via a bank or just via CDP?

If anyone has any tips or resources for where to even start reading about investments from the very, very, very basics, I would be really appreciative if you could share that too!

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Hi anon,

No, investments don't have to start with a bank. What you need is a platform that can give you access to the various asset classes, and that can be a brokerage platform with the bank, but also platform with brokers, suchs as POEMS from Phillip.

CDP is but a depository to hold your assets that are listed on SGX (the exchange). They are the custodian of your holdings. So for example, if you buy an ETF through a CDP linked broker, your CDP account will reflect your holdings. If you buy a S&P 500 ETF, or a Unit Trust, these are not listed on SGX, and instead will be held by your broker as the custodian.

You can pick up knowledge from multipleplaces, including but not limited to: books, seminars and websites. I would suggest that you get some knowledge of the following:

  • How to plan your objective(s) for investing

  • Your cash flow and net worth

  • Your risk appetite and timeframe

  • The asset classes available

  • The risk and rewards of each

  • How to build a multi asset portfolio for diversification

Seedly has a number of articles on investing for beginners, which you can read to get an idea for starters, followed by posting more specific questions here, where we will be happy to answer you.

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Bjorn Ng
Bjorn Ng
Level 9. God of Wisdom
Answered on 13 Jan 2020

Hey there, well not really. It just happens that banks also have brokerages services like DBS Vickers, Maybank Kim Eng, UOB Kay Hian. There are other brokerages such as Philips POEMs that offer the same service.

CDP is like your stock savings account - whatever stock you purchase via your brokerage will be stored in your CDP account.

On where to start, the super basics, I literally started from Hardwarezone Money Mind. There are quite a few sticky threads on investing for beginners. But HWZ do have some trolls sometimes.. Alternatively, you are exactly where you are right now - Seedly! They have very comprehensive guides in just about anything related to personal finance! In addition, you can pick up some finance books such as 100 Baggers by Christopher Mayer, just to build up that knowledge first :)

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Choon Yuan Chan
Choon Yuan Chan
Level 9. God of Wisdom
Updated on 13 Jan 2020

No, investments don't have to start with a bank.

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To your second part of your question, it is via CDP

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For basic tips or resources into starting into investing, consider taking up accountancy course to learn the basics of finance. Following which you can read some books such as "One Up on Wall Street" By Peter Lynch.

Other online forums with a wealth of knoweldge are seeking alpha and valuebuddies.com​​​

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Jonathan Chia Guangrong
Jonathan Chia Guangrong, Fund Manager at JCG Fund
Level 8. Wizard
Answered on 12 Jan 2020

CDP is basically a central account for your shares that are not held in custody by a broker. So once you buy shares the traditional way, the shares will land up in your CDP account. You need to apply for this account at SGX first before you can transact in the local stock market unless your brokerage account is custodial in nature, like Maybank KE's prefunded account.

And no, investments can start with or without a bank. You can transact your own shares by going through a non-bank broker.

For some simple resources, you can read books like Millionaire Teacher or Rich By Retirement. Both are written in our local context and are great for new investors.

And yes, one can start with ETFs. But I won't really recommend the ones here especially the ones tracking the STI due to the relatively flat performance over the years. If you want to invest into ETFs, consider using a robo advisory like Stashaway.

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No, investment does not need to begin via the bank. Instead, the bank is merely a middleman between you and the investment that you wish to make.

Before you decide to invest through ETFs, it will be important to understand yourself and the reasons for choosing ETFs over other tools available in the market.

Furthermore, it will be it will be best to understand your objective. Here are some questions to help you:

  1. What is your capital?

  2. How will you want to invest your capital? E.g. lump sum or an amount on a regular basis

  3. How long will you want to stay invested? E.g. 10 years

  4. What is your risk appetite? E.g. How do you feel about short-term volatility?

  5. What is your objective for investing?

Next, structure your wealth accumulation portfolio around your goals and risk appetite. Proper risk management helps to mitigate unnecessary risk.

Depending on the type of investment that you are looking into, there will be various sources for it. If you are open to understanding further on how I build goals for my clients and help them grow their money through various investment vehicles, feel free to get in touch.

Here is everything about me and what I do best.

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