Consideration when opening live account for forex trading

Forex trading are getting popular in Singapore. I noticed a surge in various media advertising on learning to trade forex. To begin trading, you would need to have an account. So let's consider what are some of the things to look out for when opening a live forex trading account.

• Get a forex broker located in Singapore, so that it is regulated by MAS and the amount deposited is insured.
• It should not impose any additional charges beside the spread, since you are buying and selling on your own. The spread has already factor in the fee.
• Ensure that the rollover interest rate is based on central bank rate. This is to prevent fluctuation/ manipulation of rate.
• It is better if account can de denominated in SGD, as SGD is still considered a stronger currency. But usually it is denominated in USD.
• It has the option for standard, mini and micro lots. Some firms will provide half a mini lot.
• Check the level of leverage and margin requirements of the firms.
• Check is your trade filled at the price you asked for.
• Firms may offer fixed or tight spread. If you are scapling, then select one that provide tight spread.
• Most firms provide demo accounts. Open demo accounts of various firms to try out their trading platforms before deciding on a particular firm to park your money.
• Check with people who are into forex trading for valuable feedback on how certain trading platforms are performng.

4 tips on investing in shares

Don't get over-emotional over your shares

It can be very difficult for one to let go, if one have lost money from a share price that has gone down. But remember most of us have only a limited sum to invest and we should put the funds to good use to maximise our returns. Holding to an investment that turn sour, it prevents you from using your money elsewhere  where you may get better return.

When to cut losses

You should set a target loss level. Once the stock reaches your target loss level, you need to take a good look at its prospects and ask yourself if there are any good reasons for hanging on to it.

Top-slice your successful investments

If a share price is on the rise, it is easy to believe that the uptrend will continue indefinitely. You can take some profit first by selling enough shares to take back your capital and make some gain. If the share prices continues to go up, you can make further gain from the unsold share. Remember what is in your pocket, is real money to you. Wise up and take some profit first before you loss all, if the share price suddenly reverse.

Check your portfolio once in a while

Shares are not to be parked under the bed and forgotten. It is important to review your holdings regularly to see whether they continue to make sense to be invested in.

Different types of bonds

The purpose here is not to give a complete lecture on what is bond. It serves to achieve a quick general understanding of what bond is for those who have not much knowledge on financial products. It hopes that the basic facts will be useful to someone who is considering to invest, yet have no idea what financial products to consider.

What is a bond?

A bond is a contract or promise by an entity to return a sum of money after a certain period of time, over the course of which interest is paid.

What are the meaning of terminology related to bond?

• Bond issuer - Entity
• Bond holder - Investor
• Tenture - Fixed period by which the money has to be repaid
• Par value/ face value - When bond matures, the investor is repaid the principal sum lent
• Coupons - Steady stream of interest payouts over the life of the loan. Payout can be annually or half-yearly

How to analyse bonds return?

One have to consider the market price of the bonds and the coupons received, in order to determine the absolute return.

How to compare return of different bonds?

Use bond yield to compare return of different bonds. Take coupon divide by market value and this will give you bond yield (coupon / market value = bond yield)


What are the risks?

• Credit risk of bond issuer: The entity defaults on the regular payout of coupon, fails to return principal sum (worst scenario) or unable to liquidate the bond where market see little/no demand.
• Inflation risk: In an inflationary environment, bond holders face the risk of having their real returns eroded by inflation or get negative return when inflation rate is higher than coupon rate.

What are the different types of bonds?

• Notes: Short-term bonds with maturity of less than a year. Returns are lower than longer-term bonds' as exposure to inflation risk is shorter.
• Long-term bonds: Bonds with maturity of between 10 and 30 years.
• Convertible bonds: Bonds with the option to be converted into stocks.
• Junk bonds: Bonds with high default risk, rated BB or lower. Because of their higher risks, they usually have higher returns to attract investors.
• Inflation-linked bonds: Bonds that have year-end payouts, in addition to the coupon, to compensate for inflation.
• Sovereign bonds: Bonds issued by goverments.
• Zero-coupon bonds: Bonds that do not give out coupon payments. Instead, they are sold at a discount to the par value upfront.

Different financial/investment products

There are many products out there. So where do a zero-knowledge person in investing starts? There is no right or wrong answers on which products to place your money on. As mentioned in my third post on Financial Freedom, it all depends on understanding the products and gauge whether that particular products fit into your risk appetite.

Time deposits are low risk and pay extremely low interests rate. It is ideal for someone who doesn't like to take risk and want something that earns slightly higher than placing them in the bank saving account.

Foreign currency deposits are another type of financial products which one needs not spend time monitoring. One would need to choose wisely which foreign currency to place your deposits. For sure you would not want to place your deposit in a depreciating currency. Another consideration is the forex loss/gain when it reaches maturity. You can consider AUD as it has been maintaining it's interests rate about 4% to 4.5% over the years (please note this is in context of taking Singapore as comparison).

Other low risk products will be Singapore Government Bond, Statutory Board Bond and Singapore Government Securities. As we all know, Singapore Government are quite trustworthy and they will not let it collapse. However they ain't paying coupon rates as good as 10 or 20 years ago.

Next in line will be unit trust and structure deposits. You would need to know what are the underlying products of unit trust and structure deposits. Are these products tag to blue chips, currencies, commodities, gold, ETF, stocks etc? Are they looking at Asian market, European market etc.

Trading shares as an investor (long-term) or trader (short-term). If you buy shares for dividend, then you may have to study the annual report, know the industy etc to ensure the company will pay you dividend later. Do note that the annual report may not longer be reliable for deriving those important ratios for company whose business nature is on project basis. The new accounting standards require recognition of revenue upon completion and no longer on percentage recognition, hence will result extreme flucuation in the margins. It may affect the ratio computation and trend may not exist for investor to make wise decision.

Forex trading has been getting popular recently in Singapore. This is a highly risky product. I would advise anyone who are interested in forex trading, to attend some classes first before entering into this. Otherwise you would regret. You can consider attend some classes from Terraseeds where the trainer will tell you the truth about the pros and cons on forex trading.

You may consider the following products with 1 being low risk and 10 being high risk.

• Time Deposits
• Foreign Curreny Deposits
• Singapore Government Bond
• Statutory Board Bond
• Singapore Government Sercurities
• Unit Trust
• Structured Deposits
• Corporate Bonds
• Shares Trading
• Forex Trading

The above order may differ due to economic situations locally/globally and personal risk appetite. As such it is for reference only. Don't rush into it just because people around you are into it. Take your time to understand the financial products even if it means giving up an opportunity for making profit. Remember the MARKET IS ALWAYS THERE!

What type of investors are you?

To be free from financial freedom, have you started by saving? Have you built up you investment nest and ready for your investment journey? Before you jump into it, you would need to identify your risk appetite. Do you classify yourself as a risk taker or a risk averse investor? This is important to identify what type of financial products one will be comfortable in.

Lower risk investments will usually generate lower returns and higher risk investments will generate higher returns. Higher returns are expected for compensating investors for taking additional risk. Hence a risk taker will go for high-risk products in their portfolio. Risk averse person dislikes risk and goes for "safer" products which give low returns.

Spend sometime to think about what kind of investor you are, before we move on to different products in the market.

Start by saving (Part II of II)

One might never get to save if the inflow of money is simply left in the bank. Why? The tendency of human (especially ladies) to just spend when money is easily accessible. To make things worse, we have credit card luring us to spend future money.

You could try out OCBC MSA123 to help you. It is a monthly savings account (MSA) which you open with OCBC. You decide on the fixed amount and choose to save in a 13-month, 24-month or 36-month plan. It is hassle-free and a discipline way to save. You can open as many MSA as you like. If possible, you should open a few accounts at staggered time, so that your capital may be build-up faster and you do not have to wait too long for the next big thing in life - INVESTING! Want to know more about how MSA123 works, click on this link OCBCMSA123.

Another channel will be TCC. It works similarly to MSA. Of course you could simply just save in you existing bank account if it works for you.

One important thing to note. Do estimate your monthly expenses and deduct the amount from you income, to gauge how much you could afford to set aside, without running into daily cashflow problem affecting your daily life.

Start by saving (Part I of II)

People everywhere are talking about retirement planning, advising you to invest in this or that product. But how, with no capital nests to do so, especially when you just enter into working world or starting a family. Envy builds up when you see others (especially friends from rich families) with the extra cash to invest in financial products and make their money work harder for them. Often envy turns to frustration and defeat - we from the lower-middle income earners just resign to our fate and continue to live in such a sorry state.

You can be set free! Nah, you will think that I must be kidding! It may seem to be a slow start but it is the starting point to fulfil your bright future...... SAVE, SAVE & SAVE! You may think that the bank is not paying attractive interest rates, so what's the point to save, isn't it a waste of time. The point is not to earn bank interests but to BUILD UP the POOL OF CAPITAL first before you can start investing in products that give you better returns.

How long does it take to build one's capital? That will depend on your saving comfort level and the capital you require. You may decide to save $250 every month. So in 2 years, you will have $6000 ($250 x 12 months, excluding bank interests) at your disposal. To have some capital or zero capital in 2 years time will depend on the choice you make today.

It's never too late to start! The market is always there!

You will only be sorry if you never take the first step!