Ultimate Handbook to Choosing a Trading Account

In today’s day and age, people are increasingly aiming to become financially independent, investing in a variety of financial assets in the process. Nowadays, investors have the opportunity to diversify their portfolios and invest in mutual funds, direct equity, fixed deposits, NPS, various debt instruments, or commodities. A great deal of financial planning goes into selecting from this assortment of asset classes.

But for investors looking to take the equity route, it all starts with opening a Demat and trading account. A trader can use this account in India to trade shares in the stock market. This is why choosing a trading account from a credible stock broker is crucial.

As per SEBI (Securities and Exchange Board of India) rules, anyone wanting to invest or trade in the stock market electronically or by physical share certificates must open a Demat and trading account. Various financial facilities help in choosing a trading account; for example, financial institutions, banks, and private brokers.

Difference between Demat and Trading account
A Demat account shouldn’t be confused with a Trading account, and they both bring their own set of benefits:

What is a Demat Account?
A Demat account is a digital vehicle or a repository where investors can hold shares and securities. After purchasing the shares, they are digitally transferred to the Demat account.

Here are some of the benefits of a Demat account:

·         Smooth and swift transfer of shares

·         Easy tracking of activities

·         Ability to add other beneficiaries

·         24/7 access

What is a Trading Account?
On the other hand, a Trading account helps the holder to buy and sell securities through a brokerage house. It shows the transactions carried out in the stock market.

Here are some of the benefits of a trading account:

·         Access to all stock exchanges.

·         Helps to streamline the entire process

·         Allows one to use from anywhere at any time

Factors to consider when choosing the best Demat account:
Note: When opening a Demat and trading account it is important to analyze your depository participant and the service provided by them.

The Demat and trading account are from the same provider 
Most stock broking firms allow customers to open a Demat and a trading account. When opening with a single service provider, both accounts get linked. This makes storing, buying, and selling securities much more seamless and effortless. This also makes it easy for the broking firm to access the account to reduce delays.

Another addition to this is that SEBI has created a procedure for service providers to follow. Some companies also have an easy system to open a Demat and trading account: e-KYC.  E-KYC is an online process that happens from the client side, wherein it is a self-identification process through selfies and video footage. This process takes two days, while physical account opening takes more or less five days.

The user interface of the portal
Always check the interface and the access the stockbroker gives on opening the account. Some stockbrokers still do not provide the option to access both accounts through a single portal, which makes it very cumbersome for the trader to check their account on a timely basis.

So, when opening a Demat and trading account, ensure they give access to both accounts through one sign-in. Also, analyze their websites and other apps to get a clear idea of how they function.

Costs and maintenance charges
Before diving right into the process of creating a Demat and trading account, it is wise to compare multiple brokers at the same time. This will give you a fair idea of the industry standard and if other brokers offer the same thing for a better price.

A Demat account comes with charges such as annual maintenance, dematerialization, re-materialization, and more. Even if the account remains idle, the broker will charge a minimum amount of maintenance.

Reviews!
To be safer, remember to check online reviews or the history of the broking company before finalizing them. This will give a good idea of not only the functioning of the company but also how they conduct customer service. This also helps protect traders from any company malpractices or mismanagement.

To conclude, the steps to attaining financial freedom are very straightforward, with opening a Demat and Trading account representing the start of the journey. Remember that when choosing a trading account, ensure that the broking company and the depository participant provide the best features possible. Analyze multiple options provided and benefit from making the right decision.

Moneycontrol Journalists are not involved in creation of this article.