Wednesday, January 21, 2015

Standard Chartered Equities Trading: Why I Might Lose Everything And I Don't Mind

While prudent and realistic, I think this article on Dollars and Sense is borderline fear mongering.

Is Standard Chartered (SCB) really a shitty bank that will just close down and then *POOF* all your investments with them disappear?

It is possible, but the odds are slim.

Based on Global Finance World's Safest Banks list in 2014, SCB is one of the world's safest commercial banks in 2014.

It is the 35th safest commercial bank worldwide, and the 2nd safest commercial bank in the UK.

Why isn't it on the overall list of banks, and only on the commercial bank list? Well, the overall list of banks include government banks, many from Europe and China.

Even if you have $9,000 to slosh around in the stock market PER trade to minimize the commission charges, brokerages still charge 0.28% compared to SCB's 0.20%. For people who trade over $9,000 per trade, maybe only then can you consider if it is worth it to pay an extra 0.08% to have your holdings held safely with the CDP.

Who doesn't want to sleep well at night? However, as much as I would love to sleep comfortably at night knowing that my stocks are safely kept in my CDP account, the price that I will have to pay for that protection is much too steep.

My entire portfolio is just shy over $9,000 with 23 holdings. I eventually plan to slowly expand my holdings to hold around 100 counters, all in small amounts. It would be IMPOSSIBLE to cheaply build my own diversified portfolio with a broker that charges a stupid $25 fee. Honestly? Seriously? It's a joke.

- Expensive brokerage fees are bad enough.
- The high fees encourage larger positions which might be too aggressive.
- Chunky positions and high fees are huge barriers to rebalancing and taking profit.

For people with large $10k trading positions, you have your pick to which brokerage you would like to patronize. However, for the normal retail investor, I feel that the small risk I am taking with SCB catastrophically blowing up is worth the hundreds of dollars I will be saving in commissions.

The way I see it, if the world is under a global economic meltdown and SCB succumbs to it, the stocks we own are not going to be worth much anyway. Hur hur.

7 comments:

  1. I totally agree with you on this. Also, banks usually hold clients' investments in a nominee account which is supposed to protect the clients' investments by making it out of reach from the bank's creditors, in the extremely unlikely event that the bank goes belly up.

    Anyway, if we need to invest in foreign stocks in Singapore, going to any of the local brokerage houses just gives us the same counterparty risk as going to Standard Chartered.

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    1. Hi Anon,

      Sorry for the late response, but yes, fantastic points that you brought up that I forgot to mention. Industry practice is to hold client funds/investments in a separate account, so the false assumption that people have that everything is lumped together is null.

      I see some promotions by the local brokerages regarding the smaller board lots, but really nothing of any caliber to compete with SCB yet!

      Delete
  2. I think the author has good intentions but his tone is a bit too sensational...

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    Replies
    1. owq, spot on. a bit too drama, I think that's why SCB niao him, heh!

      Delete
  3. Haha see what happened http://dollarsandsense.sg/apology-and-undertaking/

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    Replies
    1. Alamak.

      Lucky I never say anything bad about SCB, haha! XD

      Delete
  4. It is extremely helpful for me. Thank you for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information?
    Stock cash tips

    ReplyDelete

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