Starting from 19 January, The Singapore Exchange would be lowering the minimum lot size for its stock market from 1,000 shares to 100 shares.
If that sounded very technical to you, fret not. Wealthmastery.sg is here to simplify that for you!
Previously, if you wanted to buy a stock on the Singapore Exchange, you would have to purchase at least a single lot of 1,000 shares. That means if you wanted to own a single lot of DBS Group Holdings, you would need at least $19,790 (At current price of $19.79 per share)!
However, with the newly reduced lot size of 100, you only need $1,979 to get a piece of action in the DBS stock!
So what this means for you?
1) Investors With Smaller Amounts Of Capital Get To Invest In More Companies
Generally, this move would benefit retail investors (this basically means you) who typically do not have as much capital as the banks. It would allow more people to invest in the Singapore stock market as the previous lot size of 1,000 would basically stop most people from entering the market unless they have a huge amount of money to invest with.
It is especially helpful for people who want to invest in those companies with huge stock prices such as DBS, Jardine or even SIA.
Now anyone (including you), can own a piece of these big boys without emptying your bank account!
2) You Get To Build A Healthier Portfolio
When the minimum lot size was still 1,000 shares, you honestly don’t have much leeway to diversify your portfolio. Even with an impressive amount of $30,000 you probably can only buy 1 lot of DBS stocks and look for something around the $10 rang – holding only 2 types of stocks in a $30,000 portfolio isn’t exactly what I would call a good risk management strategy.
With the new move, this would open up your options greatly! You can easily build a portfolio of 7 to 10 stocks with your $30,000 capital. Even if you’re one of those who subscribe to “Buffetology” and do not claim to be a huge believer of diversification, the new ruling would at least allow you to hold 3 to 5 stocks across various sectors.
3) Potential Increase In Market Volatility
For stock traders, this is definitely good news as the smaller lot size would encourage more trading activity and volume. There would be more large fluctuations and price movements which equates to volatility. And as all traders know, more volatility also means more opportunities for potential profits!
4) Encourage More Companies To List In Singapore In The Long Run
By increasing the trading volumes, Singapore might potentially attract more investors to list on the Singapore stock exchange. This can only be good news for you as an investor as it means more options and more opportunities to invest in the future.
Image Credits: todayonline.com