Opening a dematerialisation or demat account is the primary requirement that you need to fulfil if you want to invest in the stock market. No transaction of buying or selling is possible without a demat account. To open a demat account, you must sign on the agreement papers that include a ‘specific’ power of attorney (PoA) to the broker. In this article, we will discuss some of the things that you must consider before opening a demat account.
Types of Brokers
If an investor seeks to invest online in the stock market, he can open a demat account with Kotak Securities or any other broking firm. The broking firms are of two types; discount broker and service broker. A discount broker is one that carries out trading transactions in equity and derivatives on the directions of the investor. While a service broker is one that provides all the services offered by a discount broker along with additional services like investing option in mutual funds, insurance and IPOs. Service brokers are majorly broking firms.
Opening of Account
To invest in the stock market, you must have a demat account, trading account and bank account. Demat account holds the shares and securities in electronic form while the trading account is used for buying or selling the shares in the demat account. With the help of demat and trading account, you can invest in gold, IPO, shares, mutual funds, etc.
There are two depository participants in India – National Securities Depository Ltd (NSDL) and the Central Depository Services India Ltd (CDSL). The shares and securities present in the demat account are held by the depository participants. Any of the above two depository participants shall hold your shares depending upon which broking firm you have opened an account with. Demat account opening procedure involves submitting the necessary documents to the brokers.
How Accounts Function
The funds from the bank account are transferred to the trading account. The trading account has a unique ID which is used for buying and selling securities. The purchase or sale is done through the trading account via shares deposited in the demat account. Share purchase is held in the demat account whereas shares sold are debited from the demat account. Having all the three account at the same place is always beneficial and gives the user a seamless experience.
Charges on Account
Decision while selecting a broker is often influenced by the brokerage and fees charges by the broking firm. One must be careful about the one-time and recurring charges while opening a brokerage account. Also, look for the charges that are charged on trading/investing in different segments. It is advised to select the broker who charges a flat fee on all types of transactions.
To sum it up
Opening a demat account could be one of your best investment decisions as you can now trade in the equity market and fetch high returns. However, just like with any other purchase, it is necessary to be aware of the factors that could make it a good or a bad purchase. Now, that you know about the things you must consider, you may want to open your demat account with a reputed broker like Kotak Securities and make your investing easier.
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Nirmal Bang is drawn from a varying assortment of master establishments, and blend of getting, capacity and commitment is conferred to its clients. Nirmal Bang focuses adequate, comprehensive research close by and by and large headways, counterbalancing these with the talented disclosure of inborn characteristics, helpful energies and advancement.
The fact of the matter is essentially to help the theorists with augmenting their benefits.
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I have came across an article worth a read:
Investment Options for Short Term and Fix Income In India
https://dailystockmarketdose.blogspot.com/2018/06/investment-options-for-short-term-and.html
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The depository system reduces risks involved in holding physical certificates, e.g., loss, theft, mutilation, forgery, etc. It ensures transfer settlements and reduces delay in the registration of shares. It ensures faster communication with investors. Thanks for sharing a great article.