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How to buy U.S. shares in Singapore (and open a U.S. brokerage account)
As remarkable as Singapore is as a first world financial hub, our local stock market is rather… humdrum. And the main reason for that is — with 5.6 million people — the Singapore market is just too small. So unless a home-grown Singaporean company is able to expand beyond its shores, its potential growth remains limited.
However, expanding overseas into new markets brings a new host of challenges. In a region as culturally diverse as Asia, a company needs to understand different languages and local customs in each new market, and navigate the unique business regulations, tax codes, compliance laws of each country. So unless a company is able to successfully crack the humongous Chinese market, it remains challenging for many firms to grow bigger beyond Singapore.
Case in point: Old Chang Kee generates 99.5% of its revenues in Singapore (with the rest trickling in from Malaysia and Australia). Old Chang Kee’s curry puff stalls already dot the island nearly everywhere; how much larger can it grow staying in Singapore?
From sea to shining sea…
Now compare this to the United States where its home-grown companies have access to a wealthy, homogenous market of over 330 million consumers who speak the same language, share the same customs, and spend the same dollar. It’s no surprise that American corporations are some of the largest and most successful in the world. Even if they delay venturing overseas, they can rely on their domestic market alone to grow to a tremendous size.
For example, Walmart was founded in 1962 but only opened its first international store in Mexico City in 1991. Today, Walmart has since expanded to 5,993 locations worldwide, but U.S. operations still contributed 76.3% of the company’s FY2019 revenue of US$515.4 billion.
Not only that, the U.S. is also home to some of the most innovative companies in the world. This mixture of invention and a large domestic market to test new ideas means we’ll continue to see fast-growing American companies with the potential to disrupt new industries in years to come.
Have a look at the returns of some of the best U.S. companies over the last five years:
Even a company already as large as Amazon was able to grow 474.0% in just five years. You’d be hard-pressed to find any companies of similar scale and quality if you only stick to investing within Singapore.
How to buy U.S. shares in Singapore
As a foreigner investing in the U.S. market, it’s important to note that even though you don’t face any capital gains tax on your stocks investments, you do pay a 30% withholding tax on dividends. Knowing this, it makes sense to invest in U.S. stocks for growth and capital appreciation. (On the other hand, Singapore doesn’t have a dividend tax — which makes many Singapore stocks/REITs a great vehicle for dividend income.)
If you’ve never bought a U.S. stock before and you’ve always wondered how you can do so, it’s pretty straightforward. In this article, I’ll list the brokerage options available for Singapore residents, and the pros and cons of each.
1. Singapore brokerages
The first option is to simply buy U.S. shares through one of our ‘traditional’ local brokerage firms. Here’s a list of Singapore brokerages and their U.S. market trading fees:
| Brokerage | Min. Fees (US$) | Trading Commissions | Custodian Fees |
|---|---|---|---|
| CGS-CIMB Securities | 20 | 0.30% | S$2 per counter per month |
| Citibank Brokerage | 25 | 0.30% | 0.01% of your monthly average stockholding balance, up to a maximum of USD 100 every six months |
| DBS Vickers | 25 | 0.18% | S$2 per counter per month |
| FSMOne | 8.80 | 0.08% | No custodian fees |
| KGI Securities | 20 | 0.30% | None stated |
| Lim & Tan Securities | 20 | 0.30% | S$2 per counter per month |
| Maybank Kim Eng Securities | 20 | 0.30% | S$2 per counter per month |
| OCBC Securities | 20 | 0.30% | S$2 per counter per month |
| Phillip Securities | 20 flat fee | - | S$2 per counter per month |
| RHB Securities | 20 | 0.30% | S$2 per counter per month |
| SAXO Markets | 4 | 0.06% | 0.12% p.a. of stockholding balance, custodian fee calculated daily using the end of day values and charged on a monthly basis |
| Standard Chartered | 10 | 0.25% | No custodian fees |
| UOB Kay Hian | 20 | 0.30% | S$2 per counter per month |
Updated as of 21 October 2019.
From the table above, you’d notice that most local brokerages charge trading commissions of 0.30% with a minimum fee of US$20-25 to trade U.S.-listed shares. You’ll see that most of them also charge a monthly custodian fee of S$2 per foreign stock. So if you own 10 foreign stocks, you’re paying an extra S$20 a month in custodian fees for your brokerage firm to hold the shares for you.
Three options stand out, however: FSMOne, Saxo Markets, and Standard Chartered. They charge the lowest minimum fees and have no custodian fees in the case of FSMOne and Standard Chartered. Saxo Markets charges a custodian fee, but it is relatively cheaper than most Singapore brokerages until your portfolio reaches a sizable amount.
All three are solid options if you’re looking for a cheaper way to access the U.S. market compared to the rest of the Singapore brokerages. Saxo Markets, in my opinion, probably stands out the most due to its lowest fees (US$4) and the fact that it also gives you access to 36 exchanges around the world including Europe, China, Hong Kong, Japan, and Australia.
If you want to know the steps on how to open an account with a Singapore brokerage, you can check out our handy resource guide here.
2. U.S. brokerages
The second option is to go direct and open an account with a U.S. brokerage. There used to be three options for Singapore residents – Interactive Brokers, TD Ameritrade, and Charles Schwab. However, the latter recently announced it would be closing its Singapore office and will no longer be licensed to hold accounts here. (Which is a huge pity as a current Schwab account holder myself; Schwab has a really easy-to-use interface and mobile app, and recently slashed its trading commissions for U.S. stocks and ETFs to zero.)
So that leaves us with Interactive Brokers and TD Ameritrade:
| Brokerage | Min. Fees (US$) | Trading Commissions | Maintenance Fees |
|---|---|---|---|
| Interactive Brokers | 1.00 | US$0.005 per share, up to a maximum of 1.0% of trade value | Up to US$10 per month (less commission paid that month), waived if account has greater than US$100,000 in average equity for a calendar month |
| TD Ameritrade | 10.65 flat fee | - | None |
Updated as of 21 October 2019.
The standout here is Interactive Brokers which offers far, far lower minimum fees of just US$1. However, they charge a maintenance fee of US$10 a month, which is waived if you have US$100,000 in your account. So unless you’re willing to fund your account to that amount or make at least 10 trades a month with Interactive Brokers, this may be unsuitable for some investors.
If you prefer a U.S. brokerage, you can simply open an account with Interactive Brokers or TD Ameritrade online.
I’d like to point out that due to Charles Schwab’s decision to eliminate trading commissions for U.S. stocks and ETFs, it practically forced competitors to make a similar move. Which is why Interactive Brokers and TD Ameritrade now offer zero-commission trading accounts in the U.S. Unfortunately, these are still unavailable for Singapore residents at the moment.
The fifth perspective
The strength and ingenuity of the American economy over the last hundred years means that the U.S. stock market is home to many of the best companies in the world. Until Asia catches up over the next few decades, the U.S. will arguably remain the most attractive equities market for investors everywhere.
My choice of brokerages to invest in the U.S. markets would be Saxo Markets and Interactive Brokers; I personally moved to Saxo Markets after the closure of Charles Schwab in Singapore. The much lower fees and added flexibility of being able to access other Asian and European exchanges tipped the scales in Saxo’s favour, especially when compared to the excessive fees charged by many Singapore brokerages.
Saxo’s 0.12% annual custodian fee will become more expensive as your portfolio grows larger (>US$100,000). When that happens, you can choose to move to Interactive Brokers if you wish to save even more on fees in the future. But if you’re just starting out, then Saxo Markets would probably be the more practical choice for most investors.
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23 Comments
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Gem
October 22, 2019 at 1:05 pm
Thanks for sharing. Would you mind sharing based on your experience, which of the following provide best saving ?
1. FSMONE
2. Standard Charted
3. Interactive Brokerage
Adam Wong
October 22, 2019 at 1:49 pm
Hi Gem,
If you refer to the tables in the article above. FSMOne has lower fees than Standard Chartered. Interactive Brokers has the lowest fees overall, but charges a monthly maintenance fee of US$10 which is waived if you have US$100,000 equity in your trading account.
Gem
October 24, 2019 at 7:53 pm
Dear Adam,
Thanks for your reply! Understood.
HGN
October 23, 2019 at 6:50 am
Dear Adam,
How did you move broker? Any fees involved?
Thank you,
Hgn
Adam Wong
October 23, 2019 at 12:56 pm
Hi Hgn,
You first have to open the new brokerage account. Once it’s approved, you can email your new broker for the instructions to do the transfer. They will then ask you to complete some forms, after which they will liaise with your broker to make the transfer. Yes, there are transfer fees depending on the brokerage.
Alternatively, you can choose to liquidate all your holdings and then transfer the cash to your new brokerage. This may make more sense if trading commissions are low and you’re ok with a slight price movement when you reinvest.
Ming Shu
October 31, 2019 at 1:48 am
Hi,
Have you had the chance to try out iFast?
I was recently introduced to iFast. FSMOne belongs to them but it’s still a different platform. Apparently, they have 2 types of account. 1 is a DIY Wrap account which is ideal for people who trades often.It charges a 0.5% p.a. wrap fee and 0.06% min USD8 commission. Another Non-Wrap account for investors who just want to buy and hold. It charges a 0.12% commission fee and that’s it.
Ming Shu
October 31, 2019 at 1:50 am
I would also like to add on that TD Ameritrades charge a withdrawal fee of USD25 every withdrawal.
Ifast account gives u 0.4% interest if you leave your cash in their account.
Have also heard that Stand Chart doesn’t charge custody fee. But need to open an e$aver bank account with them and maintain $1000.
Adam Wong
November 1, 2019 at 3:02 pm
Hi Ming Shu,
Thanks for sharing! I haven’t had the chance to use iFast Financial.
Solyris
October 24, 2019 at 11:22 am
Hi Adam, I am stuck in the same situation as you with the closing of Charles Schwab, as I understand Charles Schwab has an office in Singapore and the funds parked with them are insured up to the first $500k. Do you see a risk in US trading platform like Interactive Brokers?
Adam Wong
October 24, 2019 at 5:15 pm
Accounts at Interactive Brokers are also insured for a maximum coverage of $500K, and up to an additional $30 million per account through Lloyd’s of London.
https://www.interactivebrokers.com/en/index.php?f=2334&p=acc
Anon
October 29, 2019 at 5:01 pm
Hi Adam,
Thanks for your write-up on Brokerages. Very timely.
I note your confirmation that funds parked with Schwab and IB are insured up to US$500k. Could you please confirm if FSMOne insures funds parked with them, similar to Schwab & IB?
FSMOne Portal indicates that Cash Acct monies are deposited in a bank account opened with Standard Chartered Bank (SCB). This bank account is designated as a Trust Account, in which the monies on held on behalf of the customers and cannot be used to offset any debts owed by FSMOne to SCB. But the Portal doesn’t mention anything about Deposits Insurance for funds parked with FSMOne. So would like your comment on this. Thanks.
Also, could you also confirm if IB and SAXO have manned offices where we could call their hotline for help? FSMOne has a manned office and this feature is very important for investors who are able to DIY their trades but still need instant and accessible Hotline Help when the need arise. Thanks!
Adam Wong
November 1, 2019 at 2:54 pm
Hi Anon,
Schwab and IB are U.S. brokerages which is why their accounts are insured up to US$500K under the SIPC: https://www.sipc.org/
FSMOne accounts are not insured but held in a trust. This means if anything were to happen to the brokerage, the shares have to be returned to you.
Saxo has a Singapore office but not Interactive Brokers at the moment: https://www.home.saxo/en-sg/contact-us
Matt
November 10, 2019 at 9:38 pm
Hey there Adam, thanks for the write up. Appreciate the effort. You mentioned your pick is saxo unless your account is over 100k USD. But FSMone has no custodian fees. Wouldn’t they be the best pick even though they have slightly higher commission charges? Is the only reason you picked saxo because they have access to a much larger range of markets? Cheers
Adam Wong
November 11, 2019 at 12:41 pm
Thanks, Matt. Yes, that’s right and the fact that I can deal with options as well. However, if you only invest in SG, US and HK stocks/ETFs, then FSMOne is perfectly fine as well.
Ace
December 1, 2019 at 1:44 am
Hi Adam
How do you find the exchange rate charged by Saxo when trading US shares? Also,they seem to charge a conversion fee of 0.75%. If that is the case, will It be on par with FSM and Standchart?
Adam Wong
December 1, 2019 at 7:34 pm
I actually have funds in USD and a multi-currency account with Saxo, so I’m fine with using them right now. In any case, I think a fee of 0.75% is still reasonable although it could be lower.
Vincent C
November 25, 2019 at 9:32 pm
Hi Adam,
With Charles Schwab buying over TD, do you think the consolidation will affect TD closing their Singapore office? Since Charles Schwab moved out of Singapore after 2 years here.
Adam Wong
November 26, 2019 at 9:12 am
There’s definitely a possibility since Schwab pulled out themselves.
Vincent C
November 27, 2019 at 8:29 am
Thanks Adam. Any recommendations you have for alternative silimar to TD in Singapore?
Vincent C
Adam Wong
December 1, 2019 at 3:54 pm
The closest I can think of right now is Saxo. It has access to U.S. stocks/ETFs/options and comparable pricing at US$4 per trade.
Simon M
November 26, 2019 at 9:15 am
Having been forced to close my not long open Schwab Singapore account and then opting to open a TD Ameritrade Singapore account instead, I dont know whether to laugh or cry at the news Schwab is now buying up TD Ameritrade. In my opinion their behaviour is anti competitive and should not be permitted. I would not be surprised if TD Ameritrade Singapore is closed too. I will not he adding more money to the account and will now be seeking alternatives accounts as a hedge against Schwab again acting in the same manner.
Vincent C
November 27, 2019 at 8:27 am
Hi Simon,
Do share if you find something good as TD.
Thanks
Terry T
December 27, 2019 at 5:49 pm
Hi Adam,
I’ve actually opened and account with TD Ameritrade but wasn’t aware that the zero commission fees does not apply to Singaporean accounts! So thanks for mentioning this in your article!
I would like to get your opinion on which brokerage should I go for then.
I’ve never done any trading before (unless you count parking some money with StashAway), but would like to get started with value investing in US stocks. I don’t expect to be trading frequently, only perhaps every now and then between months? Frequency might increase as I learn and “practice” more, but that’s not the primary objective for the next 6-9 months at least.
With this in mind, would you recommend Saxo or IB (or any other local brokerages)?
Thanks!