Demat accounts have become the de facto choice of most investors for participating in the equity markets. This is because of the convenience, speed, and safety offered by demat accounts. Demat stands dematerialized, which simply means that it is an account in which your holdings are stored in dematerialized or non-physical form. Demat account services are offered by depository participants or brokers who act as intermediaries of the stock exchanges and central depositories. You can open a demat account with any depository participant (DP) of your choice. However, before you open a demat account for trading, it is important to understand the nuts and bolts of demat accounts so that you know how to pick the best demat account for yourself based on your needs.
Things to Look for Before You Open Demat Account
1. Demat Account Charges
This is one of the most important factors to analyse before you open a demat account online. Many new investors do not take into account the plethora of small fees and charges levied by a broker that can, in the long run, eat into your earnings. There are a number of small charges associated with operating a demat account. These include:
– Account Opening Charges
– Annual Maintenance Charges
– Transaction Charges
– Dematerialization and Rematerialization Charges, etc.
It is important to make a list of all such charges and compare them from one DP to another. You should open a demat account for trading with the DP that levies the lowest charges as in the long run, this will go a long way in helping you meet your wealth creation goals.
2. Smooth Demat Account Opening Process
The whole point of having a demat account is to avail of the speed, security, and convenience offered by network technology. This means that your broker should be able to provide smooth online services in every aspect – right from opening your account to trading services to processing any service requests. You can judge a good DP by the smoothness of their account opening process. Choose only that DP to open demat account which offers a simple, fast, and hassle-free account opening experience with minimal paperwork involved.
3. Brokerage Charges
Brokerage charges are the charges that are levied by your broker or DP in return for the services provided by them. This is the main source of revenue for your broker. Brokerage is different from the transaction charges that are levied by the stock exchanges such as NSE and BSE and are fixed. Brokerage charges on the other hand vary from each broker. This means that you can compare the brokerage levied by different brokers and opt for the one that offers the lowest brokerage to open your demat account.
4. Trading Platform User Interface
This is a very important part of your trading platform. While many users tend to focus on finding the cheapest broker that levies the lowest fees, they tend to ignore the quality of the trading platform offered by the broker. The process of opening a demat account for trading is like buying a car. The user interface of the trading platform is the specifications of the car, whereas the various fees associated with it are like the cost of the car. While focusing on buying the cheapest car, it is important that one should not compromise on the drive quality, safety, mileage, and performance of the car. Similarly, your trading platform is where you will be spending most of your trading time. If it has major glitches or is not convenient to use, you can end up having a bad trading experience. A good trading platform also offers a lot of tools to the user for studying and analyzing the market that helps them make better and more informed decisions. Therefore, in the long run, a good trading platform can make all the difference between making good and bad investments.
5. Availability of Mobile Apps
Having a great user interface isn’t of much use if the trading platform also does not have a fast and reliable mobile app. We spend a lot of our time on the move. Having a reliable mobile app ensures that we can track our investments in real-time from anywhere without having to log into the desktop interface every time. The mobile app also needs to be safe besides being quick. So it is important to check if your DP has a fast and reliable mobile app before you open a demat account.
6. Investment Services
Many DPs offer their customers investment services and financial advice. Some DPs also offer learning modules free of cost that enable users to educate themselves on the nitty-gritty of the financial markets. These add-ons can be very helpful and you should check if your DP offers these before you decide to open a demat account.
7. Certificate Transfer Process
Regular traders need to dematerialize and rematerialize their shares frequently. For this reason, it is important that your DP offer these services quickly and efficiently. It is important that you find out about the process followed by your DP to transfer certificates before you open a demat account.
Conclusion
There are a number of factors you need to consider before you open a demat account. These range from fees levied by the DP, to the ease of usage provided, the reliability and utility of their trading platform to the various add-on services provided by them. Only after carefully weighing each and every factor should you open a demat account.
