Things To Know Before Opening A Demat Account

Hello Everyone, If you have seen recent market action then definitely you want to trade in the stock market. But you will need a trading account and a Demat account. Here I'm writing some things which you should know before opening a Demat account. Many times some people open a Demat account in excitement and start investing with a very small amount of investment. After some time, they quit the market because of their losses and stop investing.

But I'm telling you, you will get charged for having a D-mat and trading account on yearly basis by your stockbroker. They will charge you like AMC (Account Maintenance Charges) or DP charges. These charges are only applicable if you do not close both your trading and D-mat accounts.

Now let's talk about some things that you should know before opening a Demat account in the stock market.

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Things to Know Before Opening a Demat account

Which Broker You Should Choose

This is an important question because it matters a lot whom with you going to do your business. Now Let’s talk about stock brokers that all we have available in the market. Firstly understand that stockbrokers are two types, one called Discount Broker like Zerodha, Angel One, 5Paisa, etc., and second called Full-Service Broker like Kotak Securities, Edelweiss, Anand Rathi, etc. So, what is the difference between these brokers, and which one you should choose?

A Discount Broker will only provide you limited services and will charge you zero or too low brokerage but a Full-Service Broker will provide you everything that you will need like stocks advisory, dedicated RM who will be responsible for your portfolio and he will guide you. Against this, a Full-Service broker will charge you high brokerage which is negotiable.

So, should you choose a full-service broker or discount broker? The answer is, It depends on your trading turnover. If you do a small turnover then you should choose a discount broker because he will be enough for full filling needs but if you do a big turnover (In Crores) then you should choose a full-service broker who will manage your portfolio and help you with your trades.

Trading Software or Trading App That You Will Use

This is a crucial point that you should know before opening a Demat account with anyone. You should check the trading software or trading app that you are getting provided by your stockbroker. You can check their trading application reviews on the Internet and demos on YouTube for learning How you can buy a stock and how you can sell stock in the Share Market. In the first week of your trading, you should just try their trading app and learn how to use their trading software or trading application.

Account Opening Charges

Many Brokerage firms are still in the market that will charge you for just opening an account with them especially full-service brokers but it is free if you open your account with a discount broker. Account opening charges vary from broker to broker, it's usually between 400 to 1000 rupees. This is an also important thing that you should know before opening your Demat account.

Broker and Depository Charges That No One Tell You

If you are entering this stock market then you must know that there are many charges that you pay called hidden charges, but do you know how many hidden charges are there in the stock market and which are they. Here I am telling you all those hidden charges one by one that you will pay for trading in the stock market. So be with me, read and understand very carefully.

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Brokerage and All Hidden Charges in Stock Market

1. Brokerage Charges

The first one is, the brokerage charge, this is a well-known charge in the market. This charge will be charged when you do a trade but how much you will get charged. It depends on that particular segment where you are trading. For Example, if you trade in the equity segment then you will get charged on your trade turnover. Remember you will be charged on both sides means on the buy-side and sell-side too but if your account is with a discount broker then you will get charged with zero brokerage on both sides or very low brokerage comparing a full-service broker.

Same like this, a brokerage in the stock future segment is charged on trade turnover but this will be 10 times low comparing equity brokerage. The same happens in the commodity segment and these brokerage charges are negotiable. Now let's talk about the currency segment, In the currency option segment, your brokerage charge depends on how many lots you trade. You will pay brokerage per lot in the currency segment and in the currency future, the brokerage is charged as same as in the stock future that's mean on trade turnover. And the last segment is the options stock segment, in this segment, your brokerage is charged as same as in the option currency segment.

Disclaimer: These brokerages are those brokerages that are charged by a full-service broker, not by the discount broker. Discount broker's brokerage may be different compared with a full-service broker. These brokerage charges are negotiable, you can ask your broker for low brokerage.

2. Per Scrip Selling Charges

This charge is only applicable when you sell a share from your account. This is a fixed charge of around 24 rupees per scrip means if you sell a single scrip then you will get charged 24 rupees approx and if you sell 2 scrips then you will get charged with 48 rupees approx and so on. This charge has two parts one part charged by your depository and the second part charged by your stockbroker and remember, depository charges are compulsory charges therefore this is a compulsory charge. This charge can be double if you are having your trading and Demat account with a full-service broker.

3. Call and Trade Charge

Call and trade charges are those charges which are applicable when you do your trade by calling your RM or customer care, not by yourself. Normally these call and trade charges are charged by only a discount broker, a full-service broker will do the same thing for free. So, how much they will charge you for the call and trade facility? The answer is 24 rupees approx for a single time means if you call your broker for trading they will charge you for that time and if you call again after some time they will charge you again. So, if you want to save these call and trade charges then trade by yourself, buy stock on your own and sell a stock on your own. Nowadays, It's easy to trade anywhere with anyone because today's trading software is too advanced.

4. Inter Settlement Charges

Inter settlement charges are a little bit tricky to understand especially for the noobs. Let's say, you buy a stock today and sell those shares before getting delivery of those shares. In this case, you will be charged with Inter settlement charge which is around 24 rupees. If you settle down your settlement with your broker then Inter settlement charges are applicable. If you are confused with the word of delivery then let me explain to you what is it.

Currently, we have a T+2 delivery settlement cycle with the exchange means whatever you are buying or selling from the market that will get settled only after T+ 2 days cycle. Now understand what is T+2 cycle is, T stands for Trade here and T+0 means that day when you traded for the first time, T+1 means Trade day plus one day that' means the next working day when you traded and T+2 means Trade day plus 2 working days that means the second day when you traded for the first time. As a told you already, your delivery will be confirmed only on T+2 days and after getting delivery confirmed you call sell your stocks for free. Remember whenever you are taking trade from the market, that day you are just ordering for a particular stock for a particular quantity at a particular rate from the exchange through your broker which will get delivered only after a T+2 working days cycle.

5. Pledging Charges

Pledging charges are those charges which are charged by your depositor for pledging your stocks. So, what I am trying to say with the word pledging here? Let's say, you have zero funds in your trading account but still, you want to trade, in this case, you have to pledge your stocks for extra limits, remember limits will release accordingly to those stocks' VAR margin that you pledge with the depositor. Pledging charges are fixed charges which are around 18 rupees per scrip, quantity does not matter here the only number of scrip matters here. Let's discuss, How can you pledge your stocks?

It is very simple to do, you just have to go on your depositor's website where they have made a pledging system then just enter your PAN number. After this click on submit button and then you will see all your available stocks which can be pledged then select only those stocks that you want to pledge. Now click on send OTP button and after this, you will get an OTP from your depositor, enter that OTP and click on submit button, and done. Your limits will be released within one hour from your broker after this and you can do trade without having funds in your trading account.

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Customer Support and Service Level

Customer Support and Service Level

This is very important for you and for your stockbroker too. Wherever you want to open your account, you can take his customer support and service reviews from the Internet or YouTube. This is an important thing because you will need a person from your stockbroker who can help you to get a solution to your problem. And you will get too many problems in the beginning time but slowly-slowly it will get streamlined. If your broker's customer support and service level are good then he is one of the best options in the share market.

Make Nominee in Your Account

Making a nominee in your account is a very important thing that you should do at the time of KYC but many people avoid this step. Let me tell you why making a nominee is an important thing. Let's say, you open an account and purchase some stocks but unfortunately, you get died because of some reason then what will happen with those shares which you bought in your D-mat account. In this case, the government will forfeiture your share and your family or relative will get nothing. One more thing that can happen in this case is, your broker can make a duplicate paper of your account and sell those stocks on behalf of you. This can only happen when your broker or RM is not a good person or entity. So, I request you all that please add a minimum of one nominee to your account.

These are all the basic things that you should know before opening a Demat account with anyone. I hope you understand it and if you have any comments, suggestions, or complaints then please write them down in the comment box below.

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