You will be able to choose between a limit and a market order and set a sensible limit price.
Wei Jie, Nadia's colleague, bought his first ETF at 9.01 one morning with a market order. The fill came back at a price several cents above what he'd seen the night before. He hadn't done anything wrong, exactly. He'd just told the market he'd pay whatever it asked, at the moment it was asking the most.
The order type you choose decides how much control you have over the price you pay. For a first order, and for most orders after it, there's a clear default.
A market order buys straight away at the best price sellers are offering at that moment. You decide how many units. The market decides what you pay.
On a busy fund with plenty of sellers close to the last price, that usually works out fine. The trouble comes when there isn't much on offer at the best price. Your order fills what it can at the lowest ask, then moves up to the next price, and the next, until it's complete.
Here's a made-up example. Nadia wants 1,400 units of Fund X. The screen shows an ask of S$3.50, but only 600 units are offered at that price. The next sellers are at S$3.52. A market order would buy 600 units at S$3.50 and 800 units at S$3.52. Her average price would be about S$3.511, and the order would cost S$4,916 instead of the S$4,900 she expected. That's S$16 more, on top of commission, for not setting a price.
On a thinly traded fund, or at a moment when sellers have pulled back, the jump between price levels can be much bigger than two cents.
A limit order sets the highest price you're willing to pay. It will only fill at that price or lower. If no one will sell at your limit, the order waits.
In the same example, if Nadia places a limit order for 1,400 units at S$3.50, she gets the 600 units on offer at S$3.50 straight away. The other 800 units wait in the market until more sellers appear at S$3.50 or lower. She never pays S$3.52 unless she changes her limit.
The cost of a limit order is that it might not fill at once, or at all, if the price moves away from you. For a long-term investor, that's a small cost. If an order doesn't fill today, you can look again and adjust it. Paying too much on a market order can't be undone.
Ask your broker how long an unfilled limit order stays in the market. Many cancel it at the end of the trading day. Some let you choose a longer period. Check what you've chosen before you leave an order sitting.
For a buy order, set your limit at or very close to the current ask. A limit at the ask is likely to fill quickly at the price you see. A limit a cent or two below the ask might save a little, but it might also sit there all day while the price drifts up.
Don't set your limit far above the ask to "make sure it fills". That turns your limit order back into something close to a market order and gives away the protection it offers.
Check the limit against the last price and the bid before you submit. A typing slip, S$35.0 instead of S$3.50, is easy to make on a phone, and some brokers will warn you about a price far from the market, but not all of them will.
SGX runs special phases around the open and the close of each trading day. Orders placed before the market opens are matched together at a single opening price, and something similar happens at the close. Just after the open and just before the close, prices and spreads can be jumpier than during the rest of the day, as market makers adjust their quotes.
Wei Jie's 9.01 order caught exactly that moment. For a long-term purchase, there's nothing to gain from trading in those minutes. Wait until the market has been open for a while, look at the bid and ask, and place your order when the spread looks normal for that fund. Check SGX's website for the current trading hours and phases, because they can change.
Nadia's routine is simple. She opens the app mid-morning, checks that the spread on Fund X is about where it usually is, sets a limit at the ask, and confirms the order. If it fills, she's done. If part of it waits, she leaves it until the afternoon before deciding whether to adjust.
Open your broker's app or the SGX website during trading hours and look at your chosen ETF's bid and ask. Decide what limit price you'd set for a buy order today, and write down why that price makes sense.
Look at your ETF's current bid and ask and write the limit price you would set for a buy order and why.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).