Today almost everyone has an online demat account that enables to hold shares in electronic form. After all, the old method of holding shares in physical form is so very cumbersome. When you open a demat account it is more of a routine action than something that is elaborately thought through. At the end of the day, you demat account is where you are going to store your long term wealth. As well do your homework before opening your demat account. There are some key things to take care while opening demat account. You need to know how to handle demat account and the factors to be considered while opening demat account. Here are 10-such parameters that can become critical success factors for your demat account.
10 factors to consider when you open your demat account
The first question to ask is where is your trading account located? As per the existing norms, you are allowed to have your DP account and your trading account with different brokers. However, in the interest of your own convenience (like issuing your Debit Instruction Slips, resolving trading issues etc) it is advisable to have your trading account and the demat account at the same place.
Does the DP offer online demat facility. This may appear to be a small issue but in a world where time is short you must prefer to keep everything available online. The ideal DP is one that offers you online demat access as well as a seamless link to your trading account and your bank account which you can operate online.
What are the charges and costs? Charges matter a lot in the final analysis because there are a lot of costs that are not fully apparent. You Demat account may not impose account opening charges but you still need to pay the annual maintenance charges (AMC). Then there are charges for every debit to your demat account and a host of other administrative costs. Get a complete hang of these.
Should I open BSDA or normal account? This is a question you need to ask based on your sized of holdings. If you holding size is less than Rs.2 lakh than you can make do with a Basic Services Demat account. That is a lot cheaper in terms of AMC and you must look at the option that is most viable for you.
Do I plant to dematerialize and trade or just hold the shares? In case you are just going to hold securities in the demat account then other peripheral issues do not matter too much. But if you intend to dematerialize your physical shares and also trade frequently, then you need to be a lot more finicky about the benefits that your DP offers.What are the analytics that the DP provides? Most DPs provide a host of analytics like your stock flow statement, your sectoral exposure, your thematic exposure etc. If you can get all these analytics from your DP itself, then you do not have to spend your time looking for means of getting these analyses. Talk to your DP in advance about these features before opening the account.
Are there any pending complaints on the DP? You can check this out with the SEBI website, NSDL / CDSL website or even through online forums. A word of caution here. Not all online forums are reliable but then normally there is no smoke without fire. If you see consistent complaints in such forums it should alert you to their service standards and complaint redressal mechanism.
At this stage you need to take a call on how many demat accounts you actually need. The norm is to keep one demat account for investments and one for trading. Don’t keep too many demat accounts as it can lead to unnecessary costs and difficulty in monitoring. In case you have to open a demat account now, then look to consolidate your old holdings at one place.
Should the account be in individual names or in joint names? This is an important question to answer. In case you need to keep the shares in joint name, then you need to ensure that the account is signed and executed in joint names only. You have to take the call on individual account versus joint account accordingly.
Finally, put focus on the service quality of the DP. Ensure that when your DIS forms are not misplaced, your DRF goes through on time and there is not too much of negative press coverage about the DP. These point to lack of focus on the finer aspects of managing the DP account.
Opening a demat account appears to be a fairly straight forward task. A focus on the above factors will go a long way in easing your journey.