Diversifying an investment portfolio by investing in the financial markets can help you create wealth and beat inflation. You can use a technology-driven trading platform that allows you to trade and invest smoothly. Your first step would be to open a demat account that can be used to hold all the securities in which you invest. There are numerous benefits of a demat account. It enables you to monitor your holdings and allows you to bid for IPO slots. Also, you can dematerialise your physical shares and convert them into electronic certificates with the help of a demat account.
Before opening an online demat account, you should be aware of the different types of demat accounts. Open a regular demat account if you hold Indian citizenship. A repatriable demat account or non-repatriable demat account will help you invest in the stock market if you are an NRI. A repatriable demat account helps you to transfer the funds to a foreign account but you need an NRE (Non-Resident External) account to open it. A non-repatriable demat account does not provide this facility and can be opened with an NRO (Non-Resident Ordinary) account.
You can also open a BSDA (Basic Services Demat Account), a type of regular demat account that offers the basic services at a zero AMC (Annual Maintenance Charges) if your investment value is up to Rs. 50,000. A low AMC will be charged if your investment value lies between Rs. 50,000 to Rs. 2,00,000.
Types of brokerage
Before looking at the features and services offered by a broker, you must understand the types of brokerage accounts that are available. A discount brokerage account provides all the tools you need to invest and trade on your own. It offers a flat-rate brokerage system that does not make you pay a hefty fee if your trade volume is higher. Also, the AMC and transaction charges are nominal.
A full-service brokerage account provides guidance and tips on how to invest money in the stock market. However, it will charge you a higher brokerage fee which is usually a set percentage of your trade volume. Therefore, if your trade volume is higher, you need to pay a hefty commission to the broker. Many new-age traders and investors prefer discount brokers because they are ready to learn stock market trading and can do fine without an advisory service. Services like instant loan against securities and low MTF (Margin Trade Facility) rates have also made discount brokerage accounts a lucrative prospect for investors. You can choose a brokerage account that suits your investment preferences.
As there are plenty of demat account providers in the market, choosing one can be a daunting task especially if you are a beginner in share market trading.
However, you can consider these factors before opening a demat account:
Pick the same broker for both demat and trading account
Choose a broker who also is registered as a DP (Depository Participant) with CDSL or NSDL. It will enable you to open both demat and trading accounts with the same broker. The trading process becomes streamlined when both accounts are managed by the same broker.
For instance, if your broker is not a registered DP, you will have to submit a DIS (Delivery Instruction Slip) to them each time you sell the shares. However, if you fail to submit DIS on time, the transaction could be failed due to bad delivery. Therefore, to avoid losses due to bad delivery and to trade smoothly, it is better to get a 2-in-1 demat cum trading account.
Verify whether the broker is trustworthy
Look for a broker who has a huge customer base and years of experience in the brokerage business. You can check the number of branches they have established across the country and check what the other investors say about them online. Ultimately, you must be able to find a trustworthy broker who maintains transparency in demat account fees and services.
Calculate the applicable demat account charges
Brokerage is not the only fee you will be paying for investing and trading in the stock market. You also need to pay AMC (Annual Maintenance Charges), custodian fees, and some other demat charges. Calculate the demat account charges levied by different brokers before choosing the best one to open a demat account.
Security features
Security features like data encryption, 2-step account verification, etc. can keep your demat account safe from unauthorized users.
Robust trading platform
Demat and trading accounts can be accessed via a single platform these days. You also need to connect your bank account to transfer the funds to your trading account while purchasing shares. Ensure that the broker offers a robust and secure trading platform that facilitates a smooth and seamless trading process with necessary security protocols.
Range of products
Choose a demat account that enables you to hold stocks, derivatives, mutual funds, government securities, bonds, mutual funds, and other financial instruments in a single place. It will help you to analyse your investments and monitor their growth conveniently.
