How to invest in stocks
Learn how to invest in stocks – from understanding what shares are to placing your first trade. With an IG Markets account, you can buy and own a portion of the brands you value, without paying commission.¹
Key takeaways
- To begin investing in stocks, you need to open an account with a stockbroker, fund your account, and use the platform to buy and sell shares.
- Stockbrokers act as intermediaries, providing access to exchange-listed shares and handling the buying and selling of stocks on your behalf.
- Investing in stocks can come with various risks, such as market, investment, and business risks, so it's important to manage your risk effectively.
Understanding stocks and how they work
Before you start investing, it's important to understand what you're buying. A stock represents ownership in a company. When you buy shares, you're purchasing a small piece of that business.
What is a stock?
It's important to note that 'stocks' and 'shares' are related, but not entirely the same. A stock is a security that represents a collection of shares listed on an exchange. A share is a single unit of ownership in a company.
Think about it this way – if Apple lists all its available shares on an exchange, it has listed its 'stock'. Once listed, investors can then buy individual Apple shares, each representing a fractional ownership stake in the company.
Why do companies issue shares?
Companies issue shares for various reasons. Some want to raise capital to fund business expansion or pay down debt. Others may want to raise their public profile, attract talent through stock options or allow early investors to monetise their holdings.
How do shareholders benefit?
When you own shares, you may benefit in several ways:
- Capital appreciation: if the share price increases, you can sell your shares for a profit
- Dividends: some companies pay regular dividends to shareholders from their profits
- Voting rights: shareholders often have a say in major company decisions
Keep in mind that share prices can go down as well as up, and dividends are never guaranteed. Past performance is not an indicator of future results.
Stocks vs ETFs: what's the difference?
When investing, you'll encounter both individual stocks and exchange-traded funds (ETFs). Understanding the difference can help you build a portfolio that matches your goals and risk tolerance.
Individual stocks
When you buy individual stocks, you're investing in a single company. This gives you direct exposure to that company's performance. If the company does well, your investment may grow. If it struggles, you could lose money.
Individual stocks offer the potential for higher returns, but they also come with higher risk. Your investment's success depends entirely on one company's performance.
Exchange-traded funds (ETFs)
ETFs are investment funds that hold a basket of different stocks (or other assets). When you buy an ETF, you're investing in all the companies it contains in a single transaction.
ETFs can track:
- Broad market indices (like the S&P 500)
- Specific sectors (technology, healthcare, finance)
- Geographic regions (emerging markets, Asia-Pacific)
- Investment themes (clean energy, artificial intelligence)
ETFs offer instant diversification, which can help manage risk. However, they may deliver more moderate returns compared to well-chosen individual stocks.
How stock markets and exchanges work
What is a stock exchange?
A stock exchange is a regulated marketplace where shares are bought and sold. Major exchanges include the Singapore Exchange (SGX), London Stock Exchange (LSE), New York Stock Exchange (NYSE) and Nasdaq.
For a company's shares to be traded on an exchange, it must go through an initial public offering (IPO) and meet the exchange's listing requirements. Once listed, the company's shares can be traded during the exchange's operating hours.
What is the stock market?
The stock market is a broader concept than a single exchange. It represents the collective network of all exchanges and trading venues where shares are bought and sold globally.
When you hear terms like 'stock market rally' or 'stock market crash', it typically refers to the overall movement of major market indices rather than a single exchange.
Why you need a stockbroker
Individual investors cannot directly access stock exchanges. You need a licensed stockbroker to place orders and execute trades on your behalf. Brokers act as the middleman between you and the exchange.
Modern online brokers provide trading platforms that make it easy to buy and sell shares electronically. They charge fees for their services, which vary by broker and should be factored into your investment decisions.
Active vs passive investing
There are two main approaches to investing in stocks: active and passive. Understanding the difference can help you decide which strategy suits you.
| Active investing | Passive investing | |
| Goal | Outperform the market through strategic buying and selling | Match market performance over the long term |
| Time commitment | Requires significant time and attention to market movements | Minimal time needed for monitoring |
| Approach | Frequent buying and selling based on research, analysis and market timing | Buy and hold investments that track market indices |
| Key activities | - Regular portfolio monitoring and rebalancing - Detailed fundamental and technical analysis - Responding to market news and trends |
-Investing in index ETFs or funds - Dollar-cost averaging (investing fixed amounts regularly) - Long-term holding strategy |
| Trading frequency | More frequent trades | Less frequent trading |
| Costs | Typically higher due to more transactions | Generally lower due to fewer trades |
Which approach is right for you?
Neither approach is inherently better. Active investing may suit experienced investors with time to dedicate to research and analysis. Passive investing often appeals to those who prefer a hands-off approach or are just starting out.
Many investors combine both strategies – holding a passive core portfolio of index ETFs while actively trading select individual stocks.
Understanding investment risks
All investments carry risk. Before you invest, it's important to understand the potential risks and how to manage them. No matter which stocks you choose, there will always be a degree of risk involved.
Investment risk
This is the most fundamental type of risk. Share prices fluctuate based on supply and demand, company performance and market sentiment. Your investment's value can go down as well as up, and you could get back less than you invested.
Market risk
Market risk affects entire markets or sectors rather than individual stocks. Economic downturns, interest rate changes, political instability or natural disasters can impact all investments simultaneously, regardless of how diversified your portfolio is.
Other risks to consider
Additional risks include:
- Currency risk: if investing in foreign stocks, exchange rate movements can affect your returns
- Liquidity risk: some stocks may be difficult to sell quickly without affecting the price
- Company-specific risk: individual companies may face challenges that affect their share price
This isn't an exhaustive list. Make sure you understand all potential risks before investing.
Diversification: managing risk through variety
Diversification means spreading your investments across different stocks, sectors and asset types. Rather than putting all your money into one or two companies, a diversified portfolio holds multiple investments.
Diversification can help manage risk because:
- Poor performance in one stock may be offset by better performance in others
- Different sectors and markets don't always move in the same direction
- It reduces your exposure to company-specific risks
Keep in mind that diversification doesn't eliminate risk entirely, but it may help reduce the impact of any single investment performing poorly.
Ways to manage your risk
Here are some strategies to help manage investment risk:
- Learn as much as you can about investing before you start
- Conduct technical and fundamental analysis
- Only invest money you can afford to lose
- Set stop orders to limit potential losses
- Consider diversifying across different stocks and sectors
- Review your portfolio regularly and rebalance when needed
Remember that while investing carries risk, it also offers potential rewards if markets move in your favour.
How to choose a stockbroker
Choosing the right stockbroker is an important decision. Your broker provides access to markets and the platform you'll use to manage your investments.
What to look for in a broker
Consider these factors when selecting a broker:
- Costs and fees: compare commission rates, platform fees and other charges
- Available markets: ensure the broker offers access to the stocks and exchanges you want
- Platform features: look for user-friendly interfaces, research tools and mobile access
- Regulation: verify the broker is properly licensed and regulated
- Customer support: check availability and quality of support services
- Minimum deposits: some brokers require substantial minimum balances
IG Markets rates and fees
IG Markets offers competitive pricing with no commission and no platform fees on thousands of stocks and ETFs:
| Singapore Shares | |
| Platform fee | $0 |
| Commission | $0 |
| All international shares (US, UK, Hong Kong and Japan) |
|
| Platform fee | $0 |
| Commission |
$0 |
How to select stocks to invest in
Selecting stocks requires research and analysis. While there's no guaranteed formula for success, these approaches can help you make informed decisions.
Fundamental analysis
Fundamental analysis involves evaluating a company's financial health and business prospects. This includes reviewing financial statements, assessing management quality, understanding the competitive landscape, and evaluating growth potential.
Key factors to consider:
- Revenue and earnings growth trends
- Profit margins and return on equity
- Debt levels and cash flow
- Competitive advantages and market position
- Industry trends and economic conditions
Technical analysis
Technical analysis focuses on price patterns and trading volume to identify potential entry and exit points. Technical analysts use charts and indicators to spot trends and momentum.
While fundamental analysis helps determine what to buy, technical analysis may help determine when to buy or sell.
Consider your investment goals
Your stock selection should align with your investment objectives. Are you looking for steady dividend income or capital growth? What's your time horizon? How much volatility can you tolerate?
These factors will influence whether you focus on established blue-chip companies, growth stocks or a mix of both.
Opening your IG Markets account
Getting started with IG Markets is straightforward. Our platform enables you to invest in global stocks and ETFs across global markets.
Step 1: Open your account
Download the IG Markets app to begin your investment journey. Our streamlined onboarding process makes it easy to get started.
Step 2: Complete your profile
Once you've downloaded the app, you'll need to complete your profile. We'll typically verify your identity immediately, so you can start investing without delay.
Step 3: Fund your account
You can fund your account quickly and easily using PayNow, debit or credit card, or bank transfer. We have a minimum deposit of S$20, with no maximum limits on deposits or withdrawals.
Funds are typically available immediately with PayNow and card payments, while bank transfers may take 1-2 business days. Most deposits are free, though card deposits incur a 2% fee.
When you want to withdraw money, you can do so at any time for free. Withdrawals are processed to the same account you used to deposit funds, with processing times varying by method.
How to place your first trade
Once your IG Markets account is funded, you're ready to invest. When you've identified a stock you want to buy, open the deal ticket for your chosen stock. You'll need to decide:
- How much you want to invest – either a specific monetary amount or number of shares
- Which order type to use – typically market or limit orders
- Whether to set any stop-loss levels to manage risk
For US shares, you can start investing with as little as S$1 through fractional shares. This enables you to build a diversified portfolio even with a modest budget.
Once your order executes, the shares will appear in your portfolio. You can monitor their performance, view your profit and loss, and manage your position at any time through the app.
How much you invest is entirely your decision. Only invest amounts you can afford to lose, as markets can move against you. Consider starting with smaller positions as you learn, then gradually increasing your investment as you gain experience.
Key terms every investor should know
Before you start investing, familiarise yourself with these important terms. Understanding them will help you evaluate stocks and make informed decisions.
Market capitalisation (market cap)
Market capitalisation is the total value of a company's outstanding shares. It's calculated by multiplying the current share price by the total number of shares available.
Companies are typically categorised as:
- Large-cap: generally over US$10 billion – often established, stable companies
- Mid-cap: between US$2 billion and US$10 billion – potential for growth with moderate risk
- Small-cap: under US$2 billion – higher growth potential but typically more volatile
Dividends and dividend yield
Dividends are payments companies make to shareholders from their profits. Not all companies pay dividends – growth companies often reinvest profits back into the business.
Dividend yield shows the annual dividend payment as a percentage of the share price. For example, if a stock trading at S$100 pays S$4 in annual dividends, the dividend yield is 4%. A higher yield may indicate better income potential, though it's important to consider the company's ability to sustain dividend payments.
With IG Markets, dividends from your investments are paid directly into your account. You can reinvest them to buy more shares or withdraw them as cash.
Price-to-earnings ratio (P/E ratio)
The P/E ratio compares a company's share price to its earnings per share. It's calculated by dividing the current share price by the company's earnings per share over the past year.
A higher P/E ratio might suggest investors expect strong future growth, while a lower P/E ratio could indicate the stock is undervalued or that the company faces challenges. P/E ratios are most useful when comparing companies within the same industry.
Earnings per share (EPS)
Earnings per share measures a company's profitability by dividing its net profit by the number of outstanding shares. Higher EPS generally indicates better profitability, though it should be considered alongside other metrics.
Volatility
Volatility measures how much a stock's price fluctuates over time. High volatility means larger price swings, which can present both opportunities and risks. Low volatility indicates more stable, predictable price movements.
FAQs
How can I start investing in stocks?
To start investing, open an account with a licensed stockbroker. With IG Markets, you can create an account within minutes and access thousands of stocks and ETFs including Apple, Netflix and Tesla. You can fund your account whenever you're ready to invest.
Can anyone invest in stocks?
Yes, anyone with a funded stockbrokerage account can invest in stocks. The main reason why you need a stockbroker to access listed shares is because only registered brokers can access an exchange, place orders and execute deals.
How much is the minimum I can invest in stocks?
With IG Markets, you can start investing in US shares with as little as S$1 through fractional shares. For other markets, you can invest any amount you can afford. Remember that investments carry risk and you could get back less than you invest.
Do I need a stockbroker to buy shares?
Yes, you need a licensed stockbroker to buy shares. Individual investors cannot access stock exchanges directly. Brokers provide the platform and regulatory access required to trade shares listed on exchanges.
What's the difference between stocks and ETFs?
Individual stocks represent ownership in a single company, while ETFs hold a basket of multiple stocks (or other assets). ETFs provide instant diversification, while individual stocks offer direct exposure to specific companies. Many investors hold both.
How do I choose which stocks to invest in?
Stock selection involves researching company fundamentals (financial health, growth prospects, competitive position) and technical factors (price trends, momentum). Consider your investment goals, risk tolerance and time horizon when selecting stocks.
What are the different types of orders I can place?
There are three main order types. Market orders buy or sell shares immediately at the current price – best when speed matters. Limit orders let you set the maximum price you'll pay (or minimum you'll accept when selling) – your order only executes if the market reaches that price. Stop orders automatically trigger a trade when a stock hits a specified price – useful for managing risk with stop-losses or capturing breakout moves with stop-buys.
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