10 Factors to be Considered While Opening Trading and Demat account

Stock market trading is undoubtedly one of the elusive, yet most sought-after options to make money. In order to do it right, you must know about certain things before opening a Demat and Trading account.

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.

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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.