Which demat account is best
So you want to start trading in shares and open a demat account. How do you find out which demat account is best for you?
But before going into that, let’s understand what is a demat account. A demat account is a record of your holdings in the stock market. When you buy a certain quantity of shares of a company, there’s an entry in your demat account denoting the same. Similarly, when you sell shares, that too is reflected in your demat account. You need demat accounts since paper share certificates are no longer used.
Let’s look at the features of a top demat account
Account opening charges:
This is not especially crucial, but you could save some money by opting for a depository participant (DP) – which could be your bank or stockbroker – that waives any account opening charges. If you look around, you’ll find plenty of them offering free account opening.
Annual maintenance charges:
This is more important since it is a charge you pay every year. Annual maintenance charge is what DPs charge in order to meet the operating costs involved in a demat account. The charges can range anywhere between Rs 400 and Rs 800 depending on the DP concerned. If you don’t carry out a lot of transactions on the stock exchange, you can opt for a basic services demat account, for which there are zero charges if the value of the holdings is below Rs 50,000, and Rs 100 for amounts up to Rs 2 lakh.
You should look closer at the transaction costs since this is a charge per transaction. These charges could be a fixed charge per transaction or could be a percentage of trade value. Few brokers don’t charge for these transactions.
Quality of service:
Another thing to look for is quality of services. Choose a DP that has a countrywide network of branches or dedicated online service team. Chances are that the quality of service would be better since larger organisations set up customer service networks dedicated to their customers.
Bank or broker:
You have the choice of choosing a bank or stockbroker as your DP. Few Banks and stock broker offer accounts that combine banking, trading and demat facilities. The entire process of buying and selling shares, paying for them and getting transactions entered into the demat account becomes seamless.
You can choose the demat account by keeping in mind the points that we have discussed above. However, there is no straight answer; you need to weigh the pros and cons of the available option and choose the one which suits your requirement.
Disclaimer: The contents herein mentioned are solely for informational purpose and shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.