Explain Demat Account & How to Choose the Right One for You

Explain Demat Account & How to Choose the Right One for You

If you are about to open a demat account, you need to understand what a demat account is. A demat account is an electronic repository for all the securities you own. It stores all your stock market-related assets in an electronic form.

Think of it like your online savings bank account. With access to net banking, you can transfer funds from your savings account to anyone. Similarly, when you have a demat and a trading account, you can buy and sell stocks from anywhere, anytime. All you need is a laptop and an internet connection.

With a demat account, you do not have to keep paper certificates for your securities. This is because you hold your securities in a dematerialised (or electronic form) in your demat account. Hence, you do not have to worry about paper certificates. That saves you a lot of hassle. Now, let us discuss how to choose the right demat account for you.

Factors to keep in mind while selecting the right demat account

●     Assess your requirements: The first thing you need to do is analyse what you need. If you need financial advice (e.g., which stock to buy and when to buy), you need a full-service demat account. However, if you do not need such financial advice and can make your investment decisions yourself, you can opt for a discount broker. That said, you need to keep in mind that a full-service demat account is more expensive than a demat account with a discount broker.

●     Analyse which categories of assets you want to trade: You need to figure out the assets you want to deal in. Do you want to buy and sell only shares? Or, do you want to buy and sell shares and bonds both? Do you also want to invest in mutual funds (MFs) and exchange-traded funds (ETFs)? Are you keen to trade futures & options (F&O) as well? There are brokers who excel in providing you with a great trading experience with all the assets. However, there are brokers, who provide great service only for a few assets. Hence, you need to keep this aspect in mind.

●     Costs of a demat account: A demat account comes with various kinds of costs, like account opening charges, brokerage fees, annual maintenance fees, etc. Before opening a demat account, you must compare the fees charged by various brokers. It is not necessary that the broker who charges the lowest fees is the best. While analysing the fee structure, you should consider the service provided by a broker and your expectations from a demat account.

●     Quality of the trading website and app: You certainly do not want a demat account that comes with a trading website or an app that does not work well. For you to make stock market transactions efficiently, it is necessary that a trading website and app work seamlessly. It should have a user-friendly interface, too. More importantly, it should not get stuck. Otherwise, you will not be able to execute transactions easily.

●     Quality of customer-care: No matter what kind of an investor you are, experienced or a beginner, you may need the customer-care of your broker once in a while. Hence, you should check how professional and courteous the customer-care is before opening a demat account. If you do not like calling the customer-care and prefer going to the nearest branch of a broker, then you need to figure out how helpful the staff at that branch is.

●     Seamless broking, banking, and custody: You need a hassle-free experience with broking, banking, and custody. A broker must allow you to transfer funds to your demat account without any issues through NEFT, RTGS, UPI, etc. Similarly, you should be able to pay your broker for the services he provides and take custody of your financial assets. Hence, this aspect is important while opening a demat account.

Conclusion

Opening the right demat account can go a long way in ensuring that you have a fruitful trading journey. Conversely, if you end up opening a demat account with the wrong broker, you may face long-term consequences. Hence, you should open demat account online with a broker who can provide you with the services you need and at a cost you are comfortable paying.