You will be able to work out the smallest order you can place and what it will cost including fees.
Nadia had S$5,000 ready and Fund X chosen. She opened the order screen, typed 5,000 in the quantity box, and the app refused it. It took her a minute to realise the box wanted units, not dollars, and another minute to find out that units come in fixed bundles.
On SGX you can't simply buy any number of units you like in the normal market. Before your first order, work out the smallest amount you can buy, what it costs including fees, and how big an order needs to be before fees stop eating a large share of it.
Shares and ETFs on SGX trade in board lots, a fixed number of units per lot. In the normal market, you buy and sell in whole lots: one lot, two lots, ten lots. The lot size can differ from one security to another, so check it for your exact fund on its SGX page or in your broker's order screen. Don't assume it's the same as another fund you've looked at.
Anything less than one board lot is an odd lot. Odd lots trade in a separate part of the market, which SGX runs for exactly this purpose. You can buy and sell there, but fewer people trade, so prices can be less favourable and spreads wider. For a first purchase, stick to whole board lots in the normal market.
Custodian brokers and regular savings plans sometimes let you buy fractions of a unit or exact dollar amounts, because they pool many customers' orders. That only works when the broker holds the units for you. In a CDP-linked account, you buy whole lots.
Here's a made-up example. Say Fund X trades at S$3.50 a unit and its board lot is 100 units. One lot costs S$350.
Now add the fees. Using the made-up broker from lesson 1.4, Compare two brokers on one sheet, with a minimum commission of S$10, one lot costs S$350 plus S$10, so S$360 in total, before exchange and clearing fees. The commission alone is about 2.9% of the order. If the fund rose 2.9% the day after you bought, you'd only just be back to even.
That's why the minimum fee matters so much. It doesn't shrink as your order shrinks.
Look at what happens to that same S$10 as the order grows.
On one lot, S$350, the fee is about 2.9% of the order. On four lots, S$1,400, which is roughly what Nadia's three months of saving would buy, the fee is about 0.7%. On fourteen lots, S$4,900, which is what her S$5,000 starting amount covers, the fee is about 0.2%.
Nothing about the broker changed. The fee stayed at S$10, and the order got bigger around it. Once an order is large enough for the percentage commission to pass the minimum, at about S$8,333 with this made-up broker, the fee becomes a steady 0.12% however large the order gets.
So the order size you choose sets your cost as much as the broker does. There's no single right number, but if fees take more than about 1% of an order, it's usually worth waiting and buying a larger amount less often. That's the trade-off Nadia made in lesson 1.4 when she decided to buy every three months.
Before you place any order, do a short calculation. You'll do it often enough that it becomes quick.
Start with today's price. Multiply by the board lot size to get the cost of one lot. Decide how many lots your money covers, and multiply again for the order value. Then add your broker's commission, using the minimum if the percentage comes out lower, and roughly allow for exchange and clearing fees. Finally, divide the fees by the order value to see them as a percentage.
For Nadia's first order: S$3.50 times 100 units is S$350 a lot. Her S$5,000 covers fourteen lots, S$4,900, with S$100 left over. The commission is 0.12% of S$4,900, about S$5.88, which is under the minimum, so it's S$10. That's about 0.2% of the order. The S$100 left over, less the fees, stays in her bank account and goes towards her next purchase.
Leftover cash is normal. It's rare for your money to divide exactly into whole lots, so you'll almost always have a little left. Don't round up to the next lot unless you have the money for it.
Prices change through the day, and the price you saw last night might not be today's. Do the calculation with the current ask price, which lesson 4.2, How an ETF price is set on the exchange, showed you how to find. If the price has moved enough that your money now covers one lot fewer, plan for that before you open the order screen.
Find your chosen ETF's board lot size and its current price. Then work out what one lot would cost with your broker's fees, and what those fees come to as a percentage of the order.
Work out the cost of one board lot of your chosen ETF at today's price, plus fees, and the fees as a percentage of the order.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).