Following the SGX announcement on cutting lot size to 100 units from 1000 by Jan 19 next year. That’s great news for smaller investors as it will allow them to create a diversified portfolio more easily with a lower amount of capital.
Create a Diversified Portfolio With Less Capital
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
Large cap stocks especially like Keppel Corporation will cost only approximately $1,100 per lot instead of $11,000 previously. With a portfolio value $20,000, one will be able to own a diversified portfolio of easily close to 20 stocks including blue chip, whereas in the past it will probably take probably close to $200,000 in portfolio value to create similar kind of diversification.
Changes to Minimum Fees
A big question mark though is whether the brokerages will lower their minimum fees to facilitate more low value transactions. They should probably look at doing so as the rationale is that they may be able to make back from higher volumes instead. This will also boost retail investor interest and participation, increasing trade volumes.
Changes to Bond Sizes?
Now that equities have been downsized in quantum, I believe MAS should tackle the bond sizes as well. Current bond sizes at minimum $250k is simply out of reach to most retail investors. There is growing significant interest in bonds as people learn more about portfolio diversification, however they do not have much options with a list of less than 10 retail bonds listed on SGX. For a start, reduction to $50k minimum is good to begin with. This is very important as bonds in general do have lower risks than stocks and retail investors have every right to fully participate in this, especially if they are looking to use bond portfolio as part of their retirement strategy.