How to Buy Shares: Here’s Your Guide!

Investing in financial instruments can help enhance your wealth, build a retirement fund, or reach your long-term financial goals. One of the financial instruments that you can choose to invest in to potentially achieve your financial goals is shares.

Shares, a type of growth asset, represent units of equity ownership in a company. Typically, companies issue shares to potential investors to grow and operate their firms. Most companies may issue shares, but only the shares of publicly traded companies can be bought and sold by investors from the share market. Just like other investment products, investing in shares can be risky and rewarding. So, when a share market investor makes calculated decisions, there may be higher chances of gaining returns and profits. If the market movement goes against the predictions of the investor, he/she may lose out on potential returns and a part of their initial investment too. Hence, one must always be mindful of the risks and invest cautiously in the share market.

Reasons to Invest in Shares

Investing in shares is sometimes considered to be risky due to market fluctuations. However, it also presents the potential to earn higher returns than other investment products, making it a sought-after financial investment option. There are various other reasons as to why you may or may not want to invest in shares. Some of the pros of investing in shares are listed below:

• Potential Returns from Investment: As the price of shares fluctuates according to market conditions and the company’s performance, investors are presented with the opportunity to earn potential returns by timing the market correctly and managing risks.
• Ease of Access: The share market makes it relatively easy for you to buy and sell the shares of your choice. You can either start an online investment brokerage account to sell or buy shares, or you can engage brokers or financial planners to do the same for you.

Even though there are several benefits to investing in shares, there are some limitations that you must keep in mind before trading. Some of the cons of investing in shares are mentioned below:

• Risk of Losing Your Investment: One of the factors that can affect the share price is the performance of the underlying asset. If the underlying company underperforms, investors and promoters may sell their shares, thereby plummeting the price of the share. In such cases, when you try to sell your holdings, there might be a chance that you may even lose your invested amount. Also, if you sell your shares at a profit, depending on the tax slab and tax rules in your country, you may have to pay capital gains tax on the returns.
• Requires Comprehensive Research: When you are buying shares on your own, you must do thorough research about the share market, its movement, the company you want to invest in, the sector, etc. You must try to determine how profitable a share might be before investing in it. Financial statements, annual reports and other fundamentals are also something that you must check.

How to Buy Shares in Singapore?

If you are planning on buying shares in Singapore, then the below points might help:

• Open an Investment Brokerage Account: Shares are traded on the share market, and to be able to buy and sell these financial securities, you need to open an investment brokerage account. You can trade by yourself using their online apps or portal or trade offline by placing a buy/sell request with the firm. A brokerage is a company, bank or establishment that acts as the middleman between the investor and the share market.
• Add Money to Your Investment Brokerage Account: Once you have opened your brokerage account, you can add funds to the account. You can do so via several methods, such as internet banking, PayNow, etc. Do check with the brokerage company or bank for the preferred payment methods.
• Research and Decide Which Shares You Want to Buy: There are different types of shares and sectors that you can choose to invest in. Depending on the market capitalization, shares can be classified as large-cap, medium-cap, small-cap and micro-cap shares. You can also look at the shares of blue-chip companies.
• Buy the Shares: Once your funds have been cleared and credited to your brokerage account, you can start buying the shares of your choice by using the investment brokerage mobile app, desktop website or by contacting the broker to purchase the shares on your behalf. But, before you decide which shares you want to invest your money in, make sure that you check the historical share prices, their fundamentals, among others.

How to Buy Shares of US-based Companies?

If you wish to invest in the top global companies, then you can do so by getting an investment brokerage account with a bank or broker that offers access to the US share markets. If you are an investor who isn’t a resident of the US, but wants to invest in the US share market, then you may have to fill out the W-8 BEN form to declare that you are a non-resident alien of the US and that you will be subjected to tax on income generated from US sources. You will also need to submit forms/documents as per the requirements to open investment brokerage account with the bank. Do check the accounts for transactional fees, currency conversion fees and other fees related to the trade and choose the one that best suits your needs.

The process of buying US shares is similar to buying shares in Singapore. You can open an investment brokerage account to keep track of the price movements of the shares you purchase and book a profit if the share value increases according to your expectations.

Along with the above-mentioned points, below are some of the factors that you need to keep in mind while investing in US shares via offshore banking accounts:

1. The trading hours of the US share market
2. The commissions and fees you will have to pay
3. The process of depositing and withdrawing funds from the platform
4. The currency conversion rates for each transaction
5. The availability to trade in the US premarket and aftermarket hours.

Frequently Asked Questions

What is an example of a share?

A share can be defined as a single unit of ownership in a company or financial asset. Investors can buy and sell shares from a share exchange. Examples of shares are Apple Inc., Tesla Inc., Colgate, Microsoft Corporation, Facebook Inc., and more.

How do I buy shares?

Investors need to open an investment broking account with their bank or broker, transfer funds and then buy and sell the shares of their choice from a share exchange.

Can I buy shares without a broker?

Yes, there are a few ways in which investors can bypass a full-service broker and buy shares on their own. Some of the ways are by using a Direct Stock Purchase Plan (DSPP), a Dividend Reinvestment Plan (DRiP), among others.