In recent years, the investment landscape in Singapore has undergone a quiet revolution. For decades, buying and selling stocks and ETFs often involved paying brokers a commission on each trade—typically a percentage of the transaction value. For new investors, these fees could feel like a barrier, especially when making smaller, frequent trades. Enter zero commission trading: a trend that has captured the imagination of Singaporean investors, promising cost-free access to the stock market with the tap of a finger. But as with anything that seems “free,” the reality is more nuanced. Understanding how zero commission trades work—and the implications for your financial wellbeing—is crucial for anyone looking to make smart investment decisions.
Why Zero Commission Trading Has Gained Traction in Singapore
The rise of zero commission trading in Singapore is closely tied to the growth of digital brokerages and mobile trading platforms. In the past, investors relied on full-service brokers who provided advice, research, and portfolio management. While helpful, these services came with relatively high fees that could eat into returns, especially for retail investors starting small.
The digitalisation of finance changed that landscape dramatically. Fintech companies and global trading apps saw an opportunity to appeal to tech-savvy investors seeking cheaper, more convenient alternatives. Platforms such as Tiger Brokers, Saxo Markets, and more recently, independent apps catering to retail traders, introduced zero commission trades to Singaporeans, tapping into a growing appetite for DIY investing.
For younger investors and those new to the market, the appeal is obvious. The absence of upfront costs lowers the barrier to entry, making it easier to experiment with small amounts of capital. Even seasoned investors have taken note, appreciating that eliminating per-trade fees can improve portfolio efficiency, particularly when trading frequently or investing in smaller positions.
This trend aligns with a broader cultural shift in Singapore: increasing financial literacy, growing interest in self-directed investing, and an understanding that early and consistent investing can be a powerful wealth-building tool.
How Zero Commission Trades Actually Work
Despite the name, “zero commission” does not mean that trading is entirely free. The term simply refers to the absence of a broker-imposed fee per trade. Brokers still need to generate revenue, and they do so through a variety of channels that may not be immediately apparent to investors.
One common method is the spread. This is the difference between the buy and sell prices of a security. Even if you pay no commission, the price you buy at might be slightly higher than the market price, and the price you sell at slightly lower. Over time, these small differences can affect returns, particularly for investors who trade frequently.
Other sources of revenue for brokers include platform fees, currency conversion charges, or interest earned on uninvested cash in your account. For investors trading US-listed securities from Singapore, currency conversion costs can quietly add up. Some platforms may also offer premium features or margin trading, which generate additional revenue streams.
Ultimately, zero commission trading shifts the cost structure rather than removing it entirely. Understanding these hidden costs is essential to avoid unpleasant surprises and ensure your investment strategy remains effective.
The Benefits of Zero Commission Trading
There are undeniable advantages to zero commission trading, particularly for retail investors in Singapore.
- Cost Efficiency: Without per-trade fees, investors can build diversified portfolios even with modest amounts of capital. Small, incremental investments no longer get penalised by high commissions, encouraging consistent investing habits.
- Accessibility: Mobile apps and online platforms have simplified the process of investing. Opening an account, funding it, and executing trades can be done from a smartphone, making the market more accessible to a broader audience.
- Market Participation: Lower costs can encourage more people to invest, enhancing financial literacy and engagement. For Singaporeans, this aligns with government initiatives promoting investment awareness and retirement preparedness.
- Flexibility: Zero commission trading allows investors to experiment with different strategies—such as dollar-cost averaging or periodic rebalancing—without worrying about fees eroding returns.
The Drawbacks and Risks
However, zero commission trading is not a panacea, and it comes with its own set of challenges:
- Overtrading: With the perception that trading is free, investors may be tempted to trade too frequently. Research consistently shows that excessive trading can reduce long-term returns and increase exposure to market volatility.
- Limited Advice: Many zero commission platforms are self-directed and do not provide personalised investment advice. Investors new to the market may miss the guidance they would receive from a full-service broker.
- Hidden Costs: As noted, spreads, conversion fees, or platform charges can erode gains. Without careful attention, investors might underestimate the true cost of trading.
- Liquidity Risks: Some smaller or less active securities may have wider spreads, making it harder to execute trades at favourable prices. This is especially relevant for Singapore-listed ETFs or smaller-cap stocks.
Understanding these risks is key. Zero commission trading can be powerful, but only when used as part of a disciplined, well-researched strategy.
Behavioural and Financial Implications
Zero commission trading has the potential to influence investor behaviour significantly. In Singapore, where retail participation in the stock market has been on the rise, the ability to trade freely can encourage impulsive decisions. It is easy to get caught up in short-term market movements, chasing trends, or reacting to news without considering long-term objectives.
This behaviour may also affect portfolio performance. Studies globally—and increasingly in Singapore—show that frequent trading often leads to lower returns compared with a patient, long-term approach. The psychological impact of “free” trading can give investors a false sense of security, leading them to underestimate risk or overestimate control over market outcomes.
Nonetheless, zero commission trading also has the potential to foster disciplined investing. When approached thoughtfully, it allows for regular contributions to diversified portfolios without worrying about transaction costs, supporting the long-term wealth-building goals that Singaporean investors are increasingly prioritising.
Practical Guidance for Singaporean Investors
To make the most of zero commission trading, consider these practical steps:
- Choose the Right Platform: Compare features, usability, hidden fees, and product offerings. Ensure the platform supports the securities you want to trade, whether local SGX stocks, ETFs, or global equities.
- Understand Hidden Costs: Familiarise yourself with spreads, currency conversion fees, and any platform-specific charges. Even small differences can impact your returns over time.
- Set a Strategy: Define your investment goals, risk tolerance, and trading frequency. Avoid overtrading by adhering to a clear plan, such as periodic portfolio rebalancing or dollar-cost averaging.
- Focus on Long-Term Growth: Use zero commission trading to support disciplined investing, rather than short-term speculation. Diversification across asset classes and geographies remains crucial.
- Educate Yourself Continuously: Leverage research, educational content, and Singapore-specific market insights to make informed decisions. Understanding the macroeconomic and regulatory environment helps contextualise trading choices.
Looking Ahead: The Future of Zero Commission Trading in Singapore
The future of zero commission trading in Singapore is likely to be shaped by several factors. Competition among brokers and fintech platforms will continue to intensify, potentially leading to further innovations in pricing, features, and user experience. Regulatory oversight may evolve as authorities seek to protect retail investors from hidden risks and ensure transparency in costs and services.
We may also see increased integration with other financial services, such as robo-advisory solutions, CPF-linked investment options, or AI-driven portfolio tools, making the zero commission model more robust and tailored to individual investors. For Singaporeans, these developments could democratise investing further while promoting more responsible, informed decision-making.
Conclusion
Zero commission trading has undoubtedly transformed the investment landscape in Singapore, making it easier and more affordable for retail investors to participate in the stock market. It aligns with broader trends in digital finance, financial literacy, and self-directed investing, offering clear benefits in cost efficiency, accessibility, and flexibility.
However, it is not a free ticket to financial success. Understanding how zero commission trades work, recognising hidden costs, and avoiding behavioural pitfalls are essential to achieving long-term investment goals. For Singaporean investors, the key is to use these tools wisely—combining the convenience of digital trading with a disciplined, informed approach to portfolio management.
In the end, zero commission trading is a powerful enabler, but like all financial instruments, its effectiveness depends on the investor’s knowledge, discipline, and strategic planning. With careful consideration and smart decision-making, it can be a valuable part of a Singaporean investor’s toolkit, helping pave the way towards sustainable wealth creation in a dynamic and evolving market.