Demat accounts may seem confusing to the common man. If you are a potential investor who is just starting and exploring the world of stock markets, you will face the dilemma of trying to choose the best Demat account to suit your needs. There are a lot of options available today which might seem overwhelming.The market regulator, SEBI (Securities and Exchange Board), has made it mandatory for those wanting to trade to open demat account. They have also created a step-by-step process which has to be followed.
So, to choose the best demat account for trading, here are the 5 things one must keep in mind:
1. Simplicity in opening: E-KYC which involves validating the investors account through Aadhar card is quite handy. Only a self-identification is required which can be done via video call as well. The only requirement is that a trade must be carried out within 48 hours. Whereas, 5 days is given to those who fill out the form in person.
2. Cost-efficient accounts: Demat accounts come with a price tag and are not completely free. Even if the investor hardly makes any transactions, most financial institutions or DPs charge the account. Some even charge for each transaction and brokers might impose a sum on the number of trades you make. Hence, it is important to compare the costs which one might incur before making your choice.
Investors also need to keep in mind that the annual charges and maintenance costs are not too hefty and are not in the negative balance zone most of the time.
3. Ease in using the software and importance to UX: The software you engage with to carry out your trades should not be confusing or take too long to load. As markets are volatile and can change in minutes, your DPs site or app should facilitate smooth transactions which includes real-time buying and selling without much hassle. They should also provide on-time updates to investors.
The account should also seamlessly integrate with your savings account and be easily accessible through various devices.
4. Providing necessary information: DPs owe it to their investors or provide in-depth analysis which showcases the current market trends. Direct call-to-action buttons, concentrating on specific industries, real-time data and analytics are all a necessary part of trading for an investor. By regular updates and displaying it on the trading site, investors can make use of the information. These value additions provide many benefits and must be considered carefully before choosing a Demat account.
5. Intraday trading and square off timing: Novice investors also need to make sure that they know when their broker will be squaring off positions. This usually happens a few hours before market closure and is requisite knowledge when you begin intraday trading.
Now that we have understood the various features a Demat account must possess let's look at the relationship between mutual funds and Demat accounts. While some might use their Demat account for trading, most use it for buying mutual funds as well. Investing in Mutual Funds Through Demat has its own pros and cons
A Demat account for mutual funds has replaced the need for physical copies of certificates. Though many ask if a Demat account is required for mutual funds, the simple answer is no, however it does offer ease of transactions and makes it easier to review, select and compare funds.
Investors need to be savvy about their financial portfolios and choose a demat account after reviewing various options. This can help facilitate better transactions which will increase their profits.
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