HOW TO CHOOSE THE BEST DEMAT AND TRADING ACCOUNT FOR YOU?

Demat and Trading account

Currently, there are hundreds of brokers and banks that offer you demat and trading accounts. Each one has its own advantages and disadvantages. So how should you choose the one that’s best for you? We will look at the criteria to check before opening an account. But, before diving into it, let’s first understand what demat and trading accounts are and why it’s necessary.

WHAT IS A DEMAT ACCOUNT?

Demat Account is an account where the shares that you buy are stored in digital form. Earlier, physical share certificates used to be issued and you were required to preserve it for proof. This eventually led to a lot of paperwork and also became a tedious work for the investor. Thus, demat accounts were introduced so that your shares are safely stored. Demat Account is similar to a savings account where you deposit or withdraw money at your will (buy or sell your shares, in case of demat account). Shares get credited to your demat account when you buy them, and debited from your account when you sell them. There is no need to maintain any minimum balance in your demat account. 

Having a demat account is necessary because you can’t directly go to the stock market to buy shares. You can only buy them when you have a demat account.

WHAT IS A TRADING ACCOUNT?

Trading account is required to place orders. Many people get confused between a demat account and a trading account. To make it clear, the orders to buy or sell are placed through the trading account and after the order is executed, the shares are deposited into your demat account which stores it until you wish to sell it. So, to invest in the stock market, trading account and demat account is a must!

BTW don’t get horrified at the thought of managing both the accounts because usually the brokers provide a 2-in-1 account and so it all happens in a single place and you don’t need to worry about it.

CRITERIA TO CHECK BEFORE OPENING AN ACCOUNT:

Now that you understand what demat and trading accounts are, let’s look at the various criteria while choosing an account.

1. VERIFYING BROKER:

Check whether the broker is a trusted one, for how many years it is in operation. See the customer reviews for checking where they face problems and make sure that the broker is regulated by the respective regulatory body in your country. Ex: SEBI (in India), SEC (in USA), ESMA (in Europe) and so on. An unregulated broker is not safe and can run away with your money.

2. TYPE OF BROKER:

First thing to decide is whether to opt for a discount broker or a full time broker. Discount brokers are the best for you if you are ready to put effort in researching and learning about companies on your own. They charge very less fees. Full time brokers are for you if you have enough money but don’t have time to put in researching stocks. Full time brokers provide you with recommendations and advice. This is an important decision so take your time and first decide which type of broker suits you. I personally use a discount broker because I’m willing to put the time and effort to learn everyday and then invest!

3. FEES:

This is a very important aspect to consider as charges vary from broker to broker. The most common fees that you will be required to pay according to priority are shown:

  • Annual Maintenance Charges
  • Brokerage Fees
  • DP Charges (incurred when you sell your share)
  • Account Opening Fees (One-Time Fee)

4. ONLINE SOFTWARE:

Check the online software that they provide. It should be user friendly and easy to use. Most of the brokers have their own mobile applications. See which one you find convenient by looking at the customers’ reviews.

5. CUSTOMER SUPPORT:

In software and mobile apps, technical glitches do come often. Your broker should have good support staff who will resolve your query as soon as possible. Try contacting your broker before opening an account and see how their customer support staff is.

CONCLUSION:

Choosing your broker is a very important decision that you will have to make because it will affect your performance in the stock market in the long run. Picking a broker at random or without researching about may eat up a lot of your money in fees or some other charges. Do check all the criteria stated above and then only open an account with the chosen broker as you don’t want your future profits to be eaten by these costs. Remember that there are hundreds of brokers available to choose from. So take your decision wisely and share this knowledge with as many people as you can.

Related Blogs

Quick Inquire

Pulse Project