To invest in the stock market, you basically require three things:-
- Trading Account: Trading account is used to buy and sell shares on stock exchanges.
- Bank Account: Bank account is used to transfer money into trading account to buy shares or receive money in your bank account when you sell shares.
- Demat Account: Demat account is used only for holding shares in electronic form. When you buy shares, the credit of shares is shown in your demat account.
Things to consider Before opening a Demat account:
Inquire about Broker
- Before you open demat account, first thing you should check is, whether the broker/DP you are opening an account is registered with a SEBI (Securities & Exchange Board of India). SEBI registration number will be mentioned at the end of your broker’s website.
- Inquire if your broker is having his own depository services. If your broker has its own depository services, than transaction of your stocks becomes hassle free because in case of any problem with your Demat account, you can directly contact your broker.
Inquire about Charges
Before opening a demat account, it is very important that you inquire about the different charges that your broker will charge you for their services. Some charges that brokers will charge you are as given below
- Annual maintenance fee: It is charged Annually & differs from broker to broker
- Brokerage Charges: the fee that you pay every time you buy or sell stocks
- Demat Transaction Charges: It is charged when you sell your delivery shares
- Dematerialization Charges: It is charged when you convert your physical shares to demat
- Share Transfer through DIS: In case you want to transfer your shares from one demat account to another, broker charge you some fees for the same.
Also, make sure that there are no hidden charges that your broker would levy in the future.
A trading platform from where you can place your trade (buy or sell) is very important. Make sure your broker provides you with advance and easy to use trading platform with integrated free charting facility & market analytics. Also make sure it should not take time to load and there are no extra charges for trading platform.