Understanding Broker Commission Fees in Singapore: How to Minimize Costs

Investing in the stock market is an exciting prospect for many Singaporeans looking to grow their wealth. But how much does it really cost to make trades, and are there ways to keep these expenses in check? Broker commission fees can seem like an unavoidable part of the investment process, but understanding how they work and finding ways to reduce them can make a significant difference in the long term. Making strategic decisions about brokerage fees is essential for investors looking to optimize their investment returns.

Let’s break down what broker commission fees are, how they impact your investments, and explore practical ways to minimize these costs while staying active in the Singapore market.

What Are Broker Commission Fees?

When you buy or sell stocks, bonds, or other securities, a broker acts as an intermediary, facilitating the trade between you and the market. Brokers typically charge a fee or commission for this service, and in Singapore, these fees are often structured in a few key ways:

Flat Fees – A fixed fee charged per trade, regardless of the trade size.

Percentage-Based Fees – A percentage of the total trade value is taken as the commission.

Minimum Commission – Brokers often have a minimum commission fee, ensuring they earn a certain amount, even if you’re only trading small amounts.

These commissions may seem small at first glance, but they can quickly add up, especially if you’re making frequent trades or working with a large portfolio. For example, with some Singapore brokers, the minimum fee can be as high as S$25 per trade, which can cut into your returns if you're investing in smaller amounts or making frequent trades.

How Much Do Brokers Charge?

Brokerage fees in Singapore can vary widely depending on the platform or service provider you choose. Established banks like DBS Vickers, OCBC Securities, and UOB Kay Hian charge fees based on a combination of flat and percentage-based structures. Typically, for Singapore stocks, the fees are around 0.08% to 0.28% of the trade value, with a minimum fee ranging between S$10 and S$25.

How Commission Fees Affect Your Returns

Over time, these fees can make a big difference in your investment performance. Let’s say you’re making regular trades every month and each trade costs you a flat fee of S$25. That adds up to S$300 in brokerage fees per year, without considering any potential percentage-based fees. For a small investor, these expenses could significantly reduce your overall returns, especially if the market performs sluggishly.

For example, if your total returns for the year are only S$1,000, having to pay S$300 in commissions means you’re giving up 30% of your returns just to pay for transaction costs. That's why it’s crucial to keep an eye on these fees and manage them where possible.

Ways to Minimize Brokerage Fees

Given the impact these fees can have on your investments, here are some smart ways to minimize brokerage costs when investing in the market.

Choose the Right Brokerage Platform

There’s no one-size-fits-all solution when it comes to picking a brokerage platform. Each broker offers different fee structures, so it’s worth comparing platforms to find the best fit for your trading habits.

For example, if you are a frequent trader, consider brokers that offer lower minimum commissions, such as online-only platforms, which tend to have lower fees compared to traditional bank brokers. These newer platforms offer competitive pricing structures, with minimum commissions as low as S$0.99 per trade on Longbridge. This makes it an excellent option for frequent or small-scale investors who want to keep costs low. Other platforms also offer low minimum commissions, but Longbridge’s combination of affordability and user-friendly features gives it a unique edge for those looking to maximize their portfolio growth.

Bundle Your Trades

If you plan to make several trades, consider bundling them together into fewer transactions to minimize commission fees. This can reduce the number of times you pay the minimum fee. For example, instead of buying small amounts of stock across multiple trades, save up and purchase larger amounts less frequently. By doing so, you’ll pay fewer fees overall and reduce the drag on your returns.

Take Advantage of Promotions

Many brokers offer promotions for new customers, such as discounted trading fees or even commission-free trading for a limited period. This can be especially useful for first-time investors or those looking to switch brokers. For example, some platforms may offer zero commissions on your first few trades, giving you a chance to invest without extra costs.

However, it’s essential to read the fine print with these promotions, as they may come with certain conditions, such as a minimum trade amount or limitations on the duration of the promotion.

Utilize a Central Depository Account (CDP)

In Singapore, many investors use a Central Depository Account (CDP) to hold their stocks, providing a secure and direct way to manage their investments. However, CDP-linked brokers often come with higher fees, making it less cost-effective for frequent traders. On the other hand, brokers offering custodian accounts—where the broker holds the stocks on behalf of the investor—typically charge lower commission fees. While your stocks are not directly held in a personal CDP account, custodian brokers can be a more affordable option for those looking to minimize costs, especially if you're comfortable with the trade-off of not having direct CDP control.

Consider ETFs for Lower Turnover

If you’re investing for the long term and don’t need to trade often, exchange-traded funds (ETFs) can help reduce commission costs. Since ETFs allow you to invest in a basket of stocks with just one trade, you’ll minimize the number of transactions and, consequently, the number of fees you incur.

Singapore offers a variety of ETFs that track both local and international markets. By including a diversified ETF in your portfolio, you can build a balanced investment strategy while minimizing the need for multiple trades, which helps keep your overall fees low.

How to Choose the Right Broker in Singapore

Selecting the right broker depends on factors like your investment style, portfolio size, and trading frequency. For investors who trade occasionally and prioritize security, brokers offering direct access to a Central Depository Account (CDP) might be more suitable. However, for active traders or those investing smaller amounts, online platforms with lower fees and more competitive pricing structures can be a more cost-effective option. Choosing the right broker involves balancing factors such as fees, convenience, and the features that best align with your investment goals.

Before committing to a broker, consider these factors:

Commission Rates: Are you paying a flat fee, a percentage of your trade, or a combination of both?

Minimum Fees: What is the minimum amount you will be charged for a trade, and how often will you trade?

Account Types: Do you prefer the security of a CDP-linked account, or are you open to a custodian account with lower fees?

Platform Accessibility: Is the broker’s platform easy to use, and does it offer the tools you need to manage your investments effectively?

Final Thoughts: Lowering Your Investment Costs

Brokerage fees are a necessary part of investing, but with the right strategies, you can minimize their impact on your portfolio. By choosing the right platform, bundling trades, taking advantage of promotions, and considering lower-cost alternatives like ETFs, you can significantly reduce your expenses and maximize your returns over time.

With the variety of brokers and platforms available today, investors have more opportunities than ever to tailor their investments to meet their financial goals while keeping costs low. Whether you're just starting your investment journey or already managing a portfolio, being mindful of these fees is a smart way to ensure your money works harder for you.

If you're ready to start investing or looking for ways to improve your investment strategy, now’s the perfect time to compare brokers and explore more affordable options. Investing wisely is about making informed decisions and that includes minimizing unnecessary costs. Feel free to download our app and start exploring a more cost-effective investment experience right at your fingertips!