Stock
market trading is undoubtedly one of the elusive, yet most sought-after options
to make money. Investments in stock market give better returns to the people,
while offering them a great wealth accumulating opportunity. If done right,
people can make huge amount of money in a short span of time.
But you
need to have a Demat account to invest or trade in the share market. As of the
current scenario, stocks are stored in an electronic, Dematerialized form. It
is therefore important for all the aspiring investors to open a Demat account
to get started with stock trading. In order to do it right, you must know about
certain things before opening a Demat and Trading account.
The briefings listed below will serve as your guide on Things to Consider Before Opening Trading and Demat Account :-
1. Determine your needs - As an investor, you need to define your
investment plans and goals. Most importantly, determine what amount of money
you can invest in the ‘gamble’. These
particulars help in choosing a brokerage company according to your specific
trading needs. As a matter of fact know that hiring full-time brokers are an
ideal option for serious investors, whereas the discount brokers prove out to
be a better option for casual investing. Note that commission rate of full time
brokers are higher comparatively as they are accessible 24/7.
2. Verify the credentials of broker- It is very important
to verify the credibility of the broker before opening your demat account. Give
preference to the Depository Participant/broker who is registered with
Securities & Exchange Board of India (SEBI). You can easily file a
complaint against the broker in case of any fraudulent activity.
3. Collect necessary details of
the depository services - Confirm
whether or not your broker offers depository services. It is surely going to be
an added advantage if he works as a Depository Participant, because it improves
transparency in the transactions, while making the processes quicker. In
addition, you can reap the benefit of hassle free and smooth transactions. And
to the top of that you’ll get better assistance for demat-related issues.
4. Check out the risk tolerance
rate of the trading account- It is very important to select the right account type in order to get
the best return for your investment. Map the risk tolerance according to the
Income, growth and Conservation of Capital. Additionally, you should know about
the account type - whether it’s Cash and margin account, Cash only account,
Retirement-type account or a standard account.
5. Compare the different
trading platforms- There are
countless options of the companies offering tempting offers for opening an
online brokerage account. A smart investor always compares the different
available options before fixing the deal with a brokerage firm. Reach out to different
brokerage firms with queries and specific questions. This will help you in
measuring the quality of their customer service and responsive rate. Quality of
service and support matters very much in stock trading.
6. Inquire
about working of the Broker - Never miss out to inquire about the support that will be provided by
the broker. A reliable support will help you in resolving the difficulties,
while ensuring smooth functioning of the process.
7. Get details of the analytics
and research material provided by the Broker - Research and analysis play a vital role in
earning profits from stock market investments. Look for a broker who can
potentially provide good analysis and research material in the forms of
technical data, different reports and analytics. This is extremely important to
score better profits by making highly beneficial investments and trades.
8. Confirm about the mode of
payment used by the Brokerage firm - Confirm about the payment criteria used by the brokerage firm to
receive and release the investment amount and profits respectively. Find out
whether they conduct the business dealings through wire transfers or through
instant transfers. Be very careful when sharing the necessary details with your
broker when opening a brokerage account. There are a number of scam brokerage
firms in the market. Make sure website of the brokerage firm is https://
encrypted.
9. Enquire about the additional
charges - Enquire about the
various charges levied by the brokerage firm on its services. Some basic
charges of the brokers include transaction fees conversion fee, and annual
maintenance charges. Most importantly, it is important to confirm and
re-confirm about the charges that would be levied by them in the future.
10. Other Factors - There are a number of additional charges
in addition to the basic charges. They include rejected or failed instruction
charges, credit charges, mailing charges, pledge service charges and others.
The amount of these charges varies from one platform to another. They are
determined according to the account usage by the investor. Additionally, you
may also have to bear statutory charges. They include turnover charges,
Securities Transaction Tax, Sebi turnover fees, service tax, and stamp duty.
You should read the documents carefully before opening a demat account. Some
Depository Participants open demat account for free and levy the charges later.
The Concluding Word
It is not
necessary to open a demat account with the same firm where you’ve your trading
account. Hence, it is wise enough to ask for various heads that make up the
total cost of opening a demat account. Confirm whether you’ll have to pay
separate charges for trading and demat accounts.
Technology
aspect also plays an important role in stock market trading. It is therefore
important to gather proper information about the latest technology used in the
market. A good technology offers real time details of the related stocks,
margin money, ask and bid price, Cost of portfolio, financial history, data,
and various other important events. It may also offer the benefit of quick
analysis of the company that you chose for investment.
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