Why Demat Account?
In previous article I discussed about concept of Share markets. That would give you idea of basic terms and terminologies you hear on any Business News or other similar places. After that it is obvious that you will ask for the next steps.
The next step is to buy and sell shares of any company. I will not advise to buy and sell immediately. You should create Demat Account and wait for opportune moment to Buy stock of your choice. The market is volatile. It increases and decreases with time.
If you do not have platform to transact the shares you will miss the opportunity when market is oversold. many pundits say any time is good time to enter market. But they do not say anytime is good time to enter a stock.
The reason is simple. Even if market is at top some stocks may be at bottom and vice versa. Pundits search for quality stocks at cheap price. That is why they say it is never late to enter market or any time is good time to enter market.
Demat Account Things to consider
There are few things you should consider while creating Demat Account.
Brokerage Fees
Brokerage is important for Trades mainly. Traders are people who buy and sell shares often. Brokerage is fees deducted by Company where you opened your Demat account. They deduct amount on number of trades or order you perform.
A buy and a sell both are termed as order. Different companies have different brokerage fees. But there are two main categories on way companies charge you.
Percentage
In this mode company charges a percentage of total trade amount. For example if you trade 10 shares each if price 100 then total trade amount is (100 * 10 = 1,000 INR). The company deducts let assume .30% of amount as brokerage.
So the total amount you pay as brokerage is (1,000 * 0.3 /100) = 3 INR . The brokerage in this case increases with Amount of your trade.
Flat Rate
In this mode company charges a flat rate on each trade. Lets assume same example as above. The company will charge you 20 INR per order for example. So for above trade you will have to pay 20 INR. The flat rate is fixed and is independent of trade amount.
So for big trades it is often profitable than the Percentage.
Important Note
Some companies combine both of above. They have minimum brokerage which you have to pay. For example if your brokerage with percentage method is less than the minimum brokerage then you will have to pay minimum brokerage.
If you percentage brokerage is greater than minimum brokerage then you will have to pay Percentage brokerage. So you should read and understand the terms before applying for Demat account with a company.
Trading Interface
Trading Interface or Software is important as well. We will see algorithm trading or technical chart analysis to trade. It may not be a selection criteria for beginners but with time it proves useful. Though choice of tools are subjective.
You may like some tool which may not be favored by others. Some one looks for simple tools and some look for sophisticated tool.Most of the popular options provide good trading software. So if you are selecting one of the top names then you are covered.
Annual Maintenance fees
Annual Maintenance fees is yet other parameter you should look into. It is the the amount of money company charges every year. Most of the companies now waive off first year Annual Maintenance fee. But if you are in market then you are not for one year right. So do check the Annual Maintenance fees before opening account.
You have to pay this fees even if you do no trading (that is no buy or sell). So you should really take this into consideration.
Where to open your Demat Account?
It is better to open it with top names in Industry now. Most of the to private banks offer Demat account. You can have with the Banks. Opening Demat account with banks you have account with is easiest option. They will combine your Savings Account with Demat Account offering you seamless integration between the two.
The ease do come with some price. Often bank brokerage rate is greater than other competitors in market.Private Banks as well as Government Banks offer you Demat account facilities. Along with them there are few private players as well.
Below are some top private Banks , Government banks and private players. They are not listed in preference order. You can open account with them or at least check with them . Every time the offers change or it is better to have a look at them before deciding.
Note changing demat account later on can be painful experience so it is better to open account with good company. Also select the option which have branch near to you. Though branch visit is not required most of the times but in case you may have to visit for some reason.
Private banks
- HDFC bank
- ICICI bank
- Kotak Mahindra bank
Government banks
- SBI
Private Players
- Sharekhan now BNP Pariwas
- Zerodha
Where I have my Demat account?
I first joined Sharekhan. I used them for around 5 years. My experience was good with them. But later I transferred my Demat account to Zerodha. I am currently with Zerodha.
I also have on demat account (my spouse) in Aditya Birla. I like Aditya Birla interface because it gives all sort of information on a single screen. Zerodha is simple for viewing charts and other similar activities but Aditya Birla provides gives you Future Options and other stock related information. So by having both account I mixed best from two different world.
This is not a recommendation from my side. You can open account in an any provider you are comfortable with. Many users ask me about my Demat Account so I have mentioned the same above.
Most of the top providers offer decent services. You can rely on any one of them for the start and with time if you feel other is better than the one you are using you can switch.
Conclusion
I next lessons I will provide more details on Share market and trading. So stay tuned. You should read those articles as it will help you identify mistakes which is main reason people make loss.
So before buying a share you should read those articles get some starting knowledge and then dive in Stock market ocean to make profit. Before gaining those initial knowledge you should not get started.