Congratulations! So you have decided to trade securities in NSE, BSE, & other stock exchanges. You will first require a registered trading and Demat (Dematerialisation) account. A few decades back, the number of traders in India was limited. However, in the last five years, we have witnessed digitization of broking industry and a rapid growth of app based trading platforms, resulting in exponential growth in the number of Demat and Trading accounts.
To meet this surge in customer needs, stock brokers too have come up with lucrative offers, such as free account opening, zero brokerage, flat fee on F&O trading, live market updates and many more facilities to attract traders. However, to enter the world of online trading, you must choose the right Demat Account in the first place.
Read on to understand the factors that help select the right Demat Account for your investment needs.
What does a Dematerialisation account do?
A Dematerialisation account acts as a safe point for financial securities. Just as a bank account stores cash, a Dematerialisation account stores financial securities. With a Demat account, traders need not store securities in physical form. The literal meaning of Dematerialisation is converting physical securities into an electronic form. Securities in digital form are stored securely for as long as you want in the respective Dematerialisation account. Every trader will have a unique Dematerialisation account to hold financial securities. However, traders in India can have more than one Dematerialisation account.
Traders can invest in IPOs, mutual funds, and other investment options via a Dematerialisation account. However, traders cannot buy/sell all the securities listed on public stock exchanges with only a Dematerialisation account. This is because the primary function of a Dematerialisation account is to hold securities in a digital format and not buy or sell them. Therefore, investors must register for a trading account to seamlessly buy or sell securities on stock exchanges. Securities purchased with a Trading Account will be transferred to the linked Dematerialisation account. Similarly, securities will be withdrawn from the linked Dematerialisation account when you sell them on stock exchange via the Trading Account.
Choosing the right Demat account in India
You must choose the right Demat account to get the most out of your trading. Here are some factors that will help you select the right Demat Account in India:
Account opening process
To open a Demat Account, first of all, search for a registered depository participant or a stockbroker in India. A depository participant can only offer Demat Accounts, whereas a stockbroker can offer both Demat (as an intermediary) and Trading Accounts. Consider opening a Demat & Trading Account with the help of a stockbroker that offers customer friendly terms. A stockbroker with a tedious and lengthy process for opening Trading & Demat Accounts might not be the right choice. Instead, choose a stockbroker that allows you to apply for a Demat account online with option for assistance. Many reputed stockbrokers in India complete the KYC process and in-person verification online. You can open a Demat Account within few minutes.
UI/UX of the trading platform
The stockbroker will provide you with a mobile/ web application to access your Trading & Demat Account from anywhere. Always choose the trading platform that allows you to view all investments in one place. It is essential to consider ease of use & user interface of the app.
Every Demat Account in India comes with an AMC (Annual Maintenance Charge), pre-decided by the respective stockbroker. AMC is an annual charge applied by the stockbroker to keep your Demat Account active for trading activities. It also covers the costs of additional or value-added services the stockbroker offers to account holders. So don’t forget to compare the maintenance charges of different service providers for Demat account.
Account opening fees
Stockbrokers apply a charge for opening a new Demat Account. Notably, the account opening fees might differ from one stockbroker to another. Some stockbrokers might even offer a Demat Account for free in India. Some stockbrokers might even give special offer to open both Demat and Trading Accounts for free.
For every transaction via a Demat Account, one has to pay brokerage to the respective stockbroker. However, brokerage charges have significantly decreased with the rise of digitization in the broking industry. With a little effort, you can find stockbrokers in India with zero brokerage on Demat/ trading account transactions. Therefore, it is essential to compare the involved costs charged by different stockbrokers to select the right Demat account.
With the right Demat and Trading Account you can certainly ease your trading journey in 2023! Look beyond account opening fees and consider factors such as comprehensive service, customer support, trading app’s ease of use, market updates, research advice, and other costs involved, before choosing a Trading & Demat Account.