In my earlier post, I explained you about what are Demat account and Trading Account, what is a difference between them and how both are necessary for investment in the stock market. In this post, I try to explain you about how to choose best Demat Account and Trading Account in Indian Stock Market.
Below points are very much necessary before you proceed for stock trading.
1) Never follow brokers who appear on TV or print media-It is strict no when you decide to trade or invest in the stock market. These experts usually are the brokers, who never tell you to STAY AWAY from the market. However, they always insist you to trade. Sometimes they suggest you to buy and sometimes short sell. In the end, the result will be more trading means more earning for these brokers. Velocity or frequency of trade earns broker. However, it diminishes your chance to create wealth. Hence, adopt a strategy which best suits you.
2) Never pay for packages to get HOT TIPS-There are many firms which offer such services. They lure you by sending few messages and make you believe that their tips actually work well. However, if they are so experts then they may be richest on this earth. Their motive is not to make you rich, but to earn money by selling packages.
3) Volatility is inherent-Whether you buy Infosys or any cheap stocks, volatility is always there. Therefore, be ready to adjust your mind to this volatility. You must have guts to bear this volatility risk. Your broker suggests you the target price of 20% or 30% in a day or two. However, he never suggests you the negative return of 20% to 30% also possible.
4) There is no such theory or algorithm, which is perfect-You find many theories and algorithm, which these experts show you while trading. However, mind it, none of them are perfect. They may provide you the hint, but not surety. Hence, adopt your own theory or algorithm, which works for you.
5) Trading makes you mad-Yes, after a few days of trade you start to watch business channels eagerly and at the same time waits for market opening at 9 AM. Holidays to market will be a frustration for you. Hence, trying to control your emotions is very much important than executing the orders of buy/sell. Controlling your behavior is more important.
6) Stay away from Margin Trading-Initially you buy the stocks equal to amount available in your trading account. However, after a few days of trading, you start to explore new ideas to make easy money in a short span. Do remember that, margin trading need a strong heart to bear losses. It is good when the trade ends in positive. It is a disaster if it reverses your position. Your broker insists you to go for margin trading. However, he never tells you that in case of short of the margin he sells your stocks without any second look.
7) Manage a Dairy-Before proceeding trading, first have a habit of managing dairy. Before going to buy and sell, make it a habit to note why you want to buy/sell a particular stock. After a few days, you look back then you notice the mistakes you did in that trade.
Now, let us look at how to choose best Demat and the trading account for you?
1) The cost of trade or brokerage-This is the competitive world. Hence, there are brokers who lined up to provide you damn cheap broking cost. You have to decide which broker or trading company you want to open demat account with, for the purpose of your trading or investment in stock market. If it is trading purpose, then bargain with a broker. However, if you are an investor then I think no broker will reduce brokerage. Because brokers earn from your frequency of trade. In delivery based trading, the frequency of trade will be lower.
There are mainly two types of trading.
Usually, first-year brokers will not charge you on Demat account. This they call it a FREE ACCOUNT. However, later on there will be yearly charges. Hence, check the yearly Demat account charges at first. In my view, there will not be so big changes in this charge. This is also called yearly maintenance charge.
Apart from this, the broker charges you on each buy/sell and delivery of stocks. This buy/sell brokerage ranges from 1% to 0.01%. Check whether this charge applies to both side or one side (i.e. Charges while buying and selling or only while buying). Few brokers offer a fixed amount like Rs.20 per trade (irrespective of volume). So check the percentage of brokerage and the applicable minimum brokerage in Rs. You have to concentrate on these expenses if you are an intraday trader. If you buy stocks for delivery based (holding stocks in Demat Account), then brokers charge on such delivery of stocks. This again ranges from 1% to 0.25%. Usually, delivery based charges will be higher than the first said Intraday charges.
Therefore, you must concentrate on yearly Demat Charges, Intraday charges (whether applied to ONLY buying or for buying and selling) and delivery based charges. There is no strict rule that each broking firm must provide this much of minimum brokerage. Hence, they act in a competitive mind. Better to bargain for it.
2) Software and ease of use-This is the second point, which you have to look for. Usually, all brokers have their own inbuilt software, which you can download it. However, you must check some reviews to know more about this. Along with that, check their web-based application. Ease of use is very much important to understand and act immediately in day trading.
3) Day trading Square off Timing-When you do intraday trading, then at the end of a day you have to square off the position. If not, then the broker initiates himself. Hence, check the timing of such initiation. It is usually before few hours of market closure. Therefore, check whether positions will be squaring off at 2.45 or at 3.15.
4) The reputation of the broker-There are so many brokers in India. Also, due to huge competition, they offer you very cheap brokerage. But they may act against a law or may indulge in some unlawful activities. Hence, select a broker who has a good reputation in the market. Never run behind a cheap broking firm.
5) Service–When you need some help in placing orders or some other activities like a change of bank, address, or nominees, then you need the help of brokers. Hence, check for their service. How quickly they respond to you and resolve the issues. I know many brokers, who, after opening account never look at you when it comes to clarification of issues.
Apart from these types of brokers, Banks nowadays offer you 3-in-1 account. Your banker offers you savings account, Demat Account, and trading account in one place. This is more convenient as you can manage all your trading activities in one place only. Usually, brokers offer you trading and Demat accounts, but not a bank account.
Advantages of 3-in-1 Accounts–
Disadvantages of 3-in-1 Accounts–
A few points to caution you about Demat and trading accounts-
1) Whenever you receive the statement, please make it a habit to check it for transactions done.
2) Never keep your account idle. Freeze it, if you feel not operate for next 4-5 months or more.
3) Monitor your holdings regularly.
4) Never share your user name and password of your trading/Demat account with others.
5) Finally, I am a fan of EQUITY INVESTMENT but not TRADING. So I suggest you to go for INVESTING but not TRADING.
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View Comments
Its a good informative article. Want to start your investment journey and don’t know where to begin? Start with opening a demat & trading account. Choosing the right broker to assist you with this is equally important. To understand what factors to look at to pick the best Demat & Trading account, click here
Dear Rakesh,
Before doing all these, first try to understand your BEHAVIOR and RISK.
I am a long term investor with a budget of 10 lakhs. My wife has a Kotak Securities account which is not easy to understand. Their Bank statements and Ledgers are complicated. Kindly suggest me an alternate Banker for opening a 3 in 1 account, whose account is user friendly and manageable by layman investor. Charges doesn"t matter.
Dear Shrikant,
Check with SBI, ICICI or HDFC.
Many thanks. I have liked your honest and straight answers. Will try ICICI DIrect. By the way, how is Angel Broking whose office is near to me? What are the pros and cons of the non Banker Demat account?
Dear Shrikant,
I you are looking for 3-in-1 account, then how can Angel Broking fit there?
sir, can u tell that the charges like STT and transaction charges are same for all brokrage firms
Man-STT is same but brokerage charges may differ.
Sir I want to step in this market please suggest me the first step what I have to do as I don't have no knowledge about stock market, shares, trading, demat, I want to start on a small amount. Please suggest me the best
Gautam-Then first read understand and then jump. BLIND FOLLOWING OF SO-CALLED EXPERTS is dangerous to you.
sir,
i am a bit confused about opening Dmat account in between SBI cap and kotak securities.
which way to go???
pl guide.
with all the criteria mentioned above in the post,
just can not compare the two.
you have already answer this question,but m simply unable .say without experiences how to say about software and ease of use before opting for the services?
as charges are concerned, i am in favour of opening a BSDA first.
pl guide.
Nirmal-If you want to experience the software and ease of use, then better to try one and if not satisfied then shift to different.
sir,
some of my friends are having more then one account .
one for say,ease of use like kotak . second is for, say less brokerage like zerotha,third is for say,BSDA sbi cap.
is it a good thing?
can one account be good enogut for all purposes??
pl guide.
Nirmal-Think of YOUR REQUIREMENT but not your friends.
Nirmal-What confusion you have?
Good afternoon sir,
Here I want to know which full time broker is advisable for their research prospects and their tips
I am invest as per my own research only but for that to get good research platform which one is best
Motilal Oswal
Sharekhan
Angel
Pls suggest me to choose one form above three I want to use them only for research analysis I will use zerodha for trading
Jay-Relying on BROKER research for your INVESTMENT is one of the biggest mistakes.
I know sir but I will always go after my own research but I want to know which one is good for providing research platform among the motilal oswal share Khan and Angel please recommend right one.
I want only research platform
Jay-I go with Sharekhan personally.
Good morning sir,
Here I want to know which full time broker is advisable for their research prospects and their tips
I am invest as per my own research only but for that to get good research platform which one is best
Motilal Oswal
Sharekhan
Angel
Pls suggest me to choose one form above three I want to use them only for research analysis I will use zerodha for trading
Jay-If you are the INVESTOR, then never rely on the calls or research given by any brokers.
Sir,
I want to open a demat account.only investment purpose. From penny savings that I make.say 3000 /month.when I googled about good/best demat account broker, all are praising zerodha or some random one. It seems to me like paid article. What do you think about SBI cap ??? I have savings account with it. Should I go with or consider kotak ?? Not a big fan of technology or don't want any advice as you mentioned.
Pl guide me, pl suggest any one.
Nirmal-if your goal is LONGTERM INVESTMENT, then why you worry about cost? However, if you are trader, then think of discount brokers like Zerodha.
Sir,
The goal is simple and obvious like serving future education cost of kids, buying house etc.
Why I am so concerned is, say everyone is so talk about zerodha or tradegini,tradebells, flyers etc, they looks like paid article.
No one talk about SBI cap aur any other psu bank offering demat account, even for investors.
Why sbi cap is so bad??
I don't have ln large sum to put ,but then where to go?
I have stated putting money into mutual funds also.
Just wanted to invest in direct equity also.
Pl guide. Thanks.
Nirmal-Do you have enough expertise to analyze and select funds? If you are investor then as I already said go with broker of your comfort. I am neither for or against any brokers.
sir, If I have trading account with one company but the demat account with other. Then their will be extra charges by trading account company to transfer the shares to my demat account.
Maninder-It is always best to have both with one broker.
I wish to open a Demat and Trading a/c (with Zerodha).
Most importantly I wish to trade actively and report resulting profit or loss as Business Income or Loss in my ITR returns.
In view of the above, kindly advise whether
1) Current A/c is needed or savings account would suffice.
2) Whether Trade License would be needed
3) Whether Enrolment for Profession Tax is reqd.
All of the above questions basically relates to my objective in reporting my Profit or Loss as Business Income or Loss.
Kindly resolve my doubts.
Poddar-1) Savings account will suffice.
2) NO.
3) NO.