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How to Choose the Best Demat Account

Introduction:

Naveen is interested in investing in the stock market. The rise and fall in the stock markets, taking calculated risk- fascinated him. So, he decided to take the first step and start investing. Then he read about the SEBI's (Securities and Exchange Board of India) mandate of opening a Demat account for stock trading. When he looked at numerous options available in the market, giving different features confused him. Which one to opt for? What points to consider? Let's understand;

What is a Demat account?

A Demat account is required to invest in the Indian stock market. According to SEBI (Securities and Exchange Board of India), anyone who plans to invest in the stock market through the purchase or sale of shares, either electronically or through physical share certificates, must open a Demat account. A Demat Account functions similarly to a bank account for your electronic share certificates and other securities. The term "Demat account" refers to an account that facilitates the holding of investments such as stocks, bonds, government securities, units of mutual funds, and exchange-traded funds (ETFs).

Additional read: ICICI Direct- trading shares online using Demat account

Now that we know what a Demat Account is let's look at how to get one.

How can I get a Demat account?

You open a Demat Account with a central depository. In India, depository services are provided by NSDL and CDSL. A Depository Participant (DP) is a depository's agent. They act as an intermediary between you and the depository. Your bank is a Depository Participant (DP) through which you can open a Demat Account. Stockbrokers and financial institutions are also DPs, and they can help you open a Demat Account. All you need to do is-

  1. Choose the DP and submit the Demat account opening form

  2. Fulfil the required KYC norms

  3. Go through the directed verification process and sign an agreement with the DP

  4. On approval, you will get your unique BO ID (Beneficial Owner Identification Number)

Many banks and financial institutions offer the opportunity for investors to open a Demat account. Even the stockbrokers offer new investors assistance. However, for investment purposes, one must select the best option depending on your specific requirements. How? Let's discuss-

How to choose the best Demat account?

Here are few points to think about when selecting the best Demat account in India:

  1. Demat account charges:

You need to pay a few charges to maintain a Demat account. These include:

  1. Fees for opening a Demat account

  2. Maintenance Fees are charged on an Annual Basis. They are also called (AMC)

  3. Fees for transactions

  4. Charges for Dematerialisation and rematerialisation

It's critical to keep track of all such charges and compare them from one DP to the next as per your specific circumstances. You should open a Demat account with the DP that charges the lowest fees, and at the same time, have a good service record. For that, you can look at various investor forums online and see the reviews about a particular Demat account service provider.

Also Read: Everything You Need to Know About Demat Account Fees and Charges

  1. Demat account opening procedure:

The whole point of the Demat account is to take advantage of the security of your investment, speed, and convenience. Therefore, the ease with which a DP opens your Demat account is a good indicator of their quality of service.

  1. Brokerage charges:

Brokerage charges are an amount charged by your broker or DP in exchange for the services they provide. The brokerage may be charged as a certain percentage of your trade, or it may be a fixed fee per transaction. These differ from one broker to the next. You can compare the brokerage charged by various brokers and choose the one with the most appropriate option relevant to your circumstances.

  1. Investment services:

Many DPs provide investment services and financial advice to their customers. Some even offer free learning modules. These add-ons can be beneficial, so check to see if your DP offers them before opening a Demat account.

  1. User interface of the trading platform:

Getting a Demat account is like buying a bike. You have to see both cost and features. Similarly, while choosing a Demat account, you have to consider both charges and the user interface of your trading platform. You may have a bad trading experience if it has significant flaws or is inconvenient to use. However, a good trading platform also provides the user with various tools for studying and analysing the market, allowing you to make informed decisions. As a result, a good trading platform can make all the difference between making an excellent investment decision.

Conclusion

You should select a Demat account after carefully weighing the options available. The lowest charges do not mean the best Demat account alone. You need to look at the cost and performance before deciding to open the Demat account.

Disclaimer

ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  Investments in securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.

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