You will be able to set up how money goes into your trading account and how dividends come back to you.
Marcus, now with his card cleared and his buffer built, opened his account and bought his first ETF on a Monday. On Thursday he got an email from his broker about an overdue payment. He'd assumed the broker would take the money from his bank automatically. It wouldn't. He'd been supposed to transfer it himself, by a deadline he hadn't seen.
Nothing terrible happened. He paid that day and got off with a small interest charge. But it's a common first mistake, and it's easy to avoid if you set up the money side of your account before you place an order.
There are two directions to think about: how money gets from you to the broker when you buy, and how money gets back to you when your investments pay out.
When you buy on SGX, you don't pay at the moment you click. The trade is agreed straight away, and the cash and units change hands a few market days later, on the settlement date. Your broker needs the money from you by then, or by its own earlier deadline.
Brokers collect that money in one of three ways.
Some debit a linked bank account automatically on the payment due date. You authorise this once, when you set up the account, and then you just need enough money in that bank account on the day. Some brokers call this arrangement Electronic Payment for Shares, or EPS. It's the most hands-off option.
Some ask you to put cash into an account with the broker before you buy. You can only trade up to the cash you've deposited. Many app brokers and custodian accounts work this way, and some describe it as "cash upfront".
Some expect you to send payment yourself after the trade, by bank transfer or another method, before the due date. This is what tripped Marcus up.
Your broker may offer more than one of these. Find out which applies to your account, whether you must fund before you buy or can pay after, and exactly when the deadline falls. The deadline will also be printed on every contract note, which lesson 6.3, After you click buy: settlement, contract notes and your CDP statement, covers.
A missed payment is more than a reminder email. Your broker can charge interest on the overdue amount, and if you still don't pay, it can sell the shares you bought to recover the money. If the price has fallen since you bought, you owe the difference, plus fees on both trades.
Nadia's broker debits her linked bank account on the due date. So her rule is simple: before she places an order, she checks that her bank account holds the full cost plus fees, and she doesn't move that money anywhere until the debit goes through.
The other direction is money coming back. Many ETFs pay out dividends once or twice a year. Where they land depends on how your shares are held.
For shares in your CDP account, CDP pays cash dividends to you. Its Direct Crediting Service sends them straight into a bank account you choose, so the money arrives without you doing anything. You set this up with CDP, and the SGX website explains how to apply and which banks take part. Without it, you may be paid in a slower way, so it's worth doing as soon as your CDP account is open.
For shares held with a custodian, the dividend goes to the broker first. The broker then credits it to your account with them, sometimes after taking a fee per dividend, as lesson 1.2 mentioned. You may need to withdraw it yourself to get it into your bank.
Nadia links her CDP dividends to the same bank account her broker debits for purchases. One account for money in and out keeps her records simple. Some people prefer to send dividends to a separate account so they don't get spent by accident. Either works, as long as you decide.
One more thing to check while you're here. When you eventually sell, the broker pays you on the settlement date, minus fees. Find out where that money goes: back to your linked bank account, into a cash balance with the broker, or by a method you choose. You won't sell for a long time, but it's easier to check now than to find out when you need the money.
Look at your broker's account setup pages or its help section and find the answers to three questions: how it takes payment for trades, when that payment is due, and where your dividends will be paid. Write each answer down in a sentence, in your own words.
Write down how your broker takes payment for trades, the payment deadline, and where your dividends will be paid.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).