Initial purchase

The initial purchase is an important step that lays the groundwork for an investor’s investment journey. The initial purchase implies an individual’s first investment in a particular asset or security, such as bonds, stocks, mutual funds, or real estate. Compared to a hedge fund, venture capital fund, or real estate investment trust (REIT), the initial purchase amount for a mutual fund will be much smaller. Checking the investment’s criteria for the minimum first purchase amount is advisable for novice or small-scale investors.

What is the initial purchase?

An individual’s first investment in a particular asset or security is known as an initial buy. It begins an investor’s journey and establishes the foundation for their subsequent investing choices. Stocks, mutual funds, bonds, exchange-traded funds (ETFs), real estate, and alternative investments are among the asset types available for initial purchases.

Understandings initial purchase

Before making any initial purchases, it is essential to grasp the financial environment and all of the alternatives available. When choosing assets, investors should consider their investment objectives, risk tolerance, and time horizon. It is also critical to understand the costs of investing, including transaction fees, management fees, and taxes.

The initial purchase value denotes the minimum amount to be deposited into a specific investing account. The recurrent payment requirement may differ from the one-time minimum initial purchase amount.

A retail mass-market investment product such as an index fund will have a lower initial purchase limit compared to a REIT or other U/HNI products. In some instances, such as specialised funds or PMS schemes wherein the risk is considerable, the fund/investment manager or firm will have a more significant initial purchase barrier to safeguard the consumer’s interests.

Investment selection

When selecting investments for an initial purchase, investors should consider the following factors:

Minimum initial deposit

Some brokers need a minimum initial deposit; however, the amounts may differ.

Commission fees

Investors should examine the broker’s commission costs when trading Singapore stocks. Some brokers offer commission-free transactions, while others charge a minimum commission.

Trading hours

The US stock market operates from 9:30 p.m. to 4:00 a.m. Singapore time, whereas the Singapore stock market operates during typical business hours. Investors should be informed of these trading hours so that they can execute deals within the market’s opening hours.

Transaction execution

Once investors have selected their investments, they need to execute the transaction. The Monetary Authority of Singapore (MAS) proposed formalising its expectations that financial institutions have policies and processes in place to execute client orders under the best possible conditions to ensure fair results.

Investors can execute transactions through various channels, such as:

Online brokerage platforms

Many brokerages offer online platforms that allow investors to execute transactions quickly and efficiently.

Full-service brokers

Investors can work with full-service brokers who provide investment advice and execute transactions on their behalf.

Financial advisors

Investors can work with financial advisors who can help them develop a comprehensive investment plan and execute transactions.

Examples of initial purchase

Consider a young investor creating a brokerage account and buying shares of a technological company. This first purchase might assist the investor in understanding more about stock trading and market trends.

Another example can be a retiree making an investment in a bond fund, which will generate a steady stream of income. This initial purchase will help the investor meet his income needs while preserving capital.

Frequently Asked Questions

What investment options are available for an initial purchase?

Investors can make an initial investment in a variety of securities, including equities, bonds, exchange-traded funds (ETFs), mutual funds, and real estate investment trusts (REITs). Stocks provide the potential for financial appreciation, whereas bonds provide a consistent source of income. Mutual funds and ETFs enable investors to spread their investments across several assets. REITs provide investors access to the real estate market.

How do I place an order for an initial purchase?

Investors can place their initial purchase orders using online brokerage platforms, full-service brokers, or financial advisors. Online platforms make transactions more accessible and cost-effective, while full-service brokers and financial advisers give investment advice and help. Investors should check that their broker has access to the target market, such as the US or Singapore stock markets.

What are the costs associated with an initial purchase?

The initial purchase costs vary depending on the investment instrument and broker chosen. Investors may be charged minimum commission fees, trading commissions, and custodian fees. Dividends handed out by US firms are subject to a 30% withholding tax for investments in US equities. Investors should evaluate the fees and charges of several brokers to locate the most cost-effective one.

How long does it take for an initial purchase to settle?

The settlement period for the initial purchase varies depending on the investment instrument and market conditions. In the US and Singapore, equities are typically settled two business days following the trading date (T+2). The settlement duration for bonds varies according to the bond type and market. Investors should be aware of the settlement duration so that they have enough cash to finish the deal.

How do I open an investment account for an initial purchase?

Investors can create an investing account for an initial purchase by visiting their preferred broker or financial institution’s website. Personal details such as name, address, and date of birth, as well as evidence of identification and income, are often required during the procedure. Investors may also need to indicate their investing goals, risk tolerance, and time frame. Once the account is created, investors may finance it and make their first purchase.