Hassle-free online stock trading is possible with a good demat account. It allows you to hold a wide variety of financial assets such as equity shares, bonds, government securities, derivatives, mutual funds, exchange-traded funds (ETFs), etc. Some of the evaluative measures to select a good demat account are technology advancements for quick account opening and activation, ratings for a broker’s demat services, transaction costs, and other charges.
Since, in the online trading system, stock exchanges operate online and deal with dematerialised securities only, a demat account is a mandatory account for investors. A demat account helps investors hold their financial securities in an electronic format safely. Each transaction or entry in a demat account takes place under the surveillance of the SEBI (Securities Exchange of India). The SEBI allows you to open multiple demat accounts using a PAN card but with different stockbrokers.
Hence, a demat account meaning can simply be understood as a safe repository for your financial assets with numerous benefits to investors, including, a smooth and faster transfer process.
Effective Strategies to have a Good Demat Account
Following are the key factors that an investor can look at to open a good demat account:
- Safety with a Registered Stockbroker: For the utmost safety of your securities, you should find a renowned stock broker registered with central depositories in India – CDSL (Central Depository Services Ltd) or NSDL (National Securities Depository Ltd) and the SEBI.
- Demat Account Opening Process: Look for reputable stock brokerage firms that allow you to open demat and trading accounts online and faster with a simplified 100% digital process. The entire account opening process can be completed from your home. You just need to authenticate your Aadhaar data and PAN card. For the documentation process, you can upload soft copies of documents while filling out the online application. For KYC formalities, you can complete a final self-identification through a video call or short video using your smartphone or laptop.
- Figure out the charges: Stockbrokers levy charges for their demat services that include the following:
- Account Maintenance Charges (AMC): Stockbrokers charge an account maintenance fee for their demat services. Individuals can look for a brokerage firm waiving off account maintenance charges (AMC) for the first year or the next two years of opening the demat account. Discount brokers usually offer such benefits to investors.
- Account Opening Fee: Check whether it is a free demat account. Discount brokers offer a free account opening facility to investors opting for their basic and advanced subscription-based brokerage plans.
- Transaction Charges: You can find stockbrokers offering a free demat account credit facility. Such brokers charge for debit transactions only in your demat account.
- Types of Demat Account: Investors’ requirements for a demat account may vary depending on their investing goals. If you aim at investing a small amount of less than Rs. 2 lakhs, you can consider opening a basic service demat account (BSDA). A regular demat account does not restrict you towards investment value. You can invest in multiple financial assets as per your desire to diversify and maximise returns.
- Affordable Brokerages: Investors can choose an affordable brokerage plan with a renowned discount stock broker. They render demat and online trading services with their affordable subscription-based brokerage plans for beginners and professionals. You can choose a plan as per your trading requirements. You will be charged a brokerage at a flat rate or percentage, irrespective of the trade value. Also, their interest charges on margin trades are lower than full-service brokerage firms.
Individuals can look for a demat account that can be activated quickly just after the successful verification process. It will enable you to start stock trading on the same day of opening your demat account.
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