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Ssets in your brokerage trading account to liquid funds

05 Jan 2023

Many first-time investors have created demat accounts and begun online trading in the previous few years. Many investors keep some cash on deposit with their broker in order to trade when changes occur. However, no interest is paid on this money. Here are a couple solutions to this problem.


Fund transfers are quick

The simplest method to keep your money working is to simply transfer what you need for stock purchases. Many of us now use online fund transfers to pay money to brokers. In turn, they provide real-time credits. SEBI laws require stockbrokers to settle their clients' cash in trading accounts at least once a quarter. If no transactions are placed in any of the market segments through the broking account in 30 days, excess or unused money in the broking account must be transferred to clients' bank accounts.


Use liquid funds of mutual funds

Purchase liquid exchange-traded funds (ETF). Because ETFs are traded on stock markets, your broker can purchase them on your behalf. Some brokers do not impose fees for trading in such ETFs. However, other fees, such as an exchange fee, apply. The returns are also comparable to those provided by savings accounts. Investors can also put their money in liquid mutual fund schemes and borrow against them. The funds that are stored in this manner earn a money market return. Up to the seventh day after unit allotment, liquid systems have a graded exit load. Furthermore, if you submit your order before 1-30PM, the complete sale revenues are credited to your account the next day.


Margining with equities and mutual fund units

For some investors, these investments may appear to be a headache. In that instance, they can use their previous investments as collateral and obtain margin against them. You must promise the equities held in your broker's demat account. You can accomplish this online by logging into your brokerage account. You can begin a pledge request by selecting stocks to pledge. Depositories will give you an email or SMS with a link to finish the procedure by entering a one-time password. The pledging procedure takes less than 10 minutes to complete. The broker provides a margin on the securities being offered. While liquid fund units can earn up to 90 percent of their market value, frontline stocks can earn up to 70 percent. Brokers can adjust the margin on offer in accordance with their risk-management procedures.


You can also buy equities on a delivery basis, with T+2 fulfilling the obligation. You can trade without having to wait for your account to be funded. If you are having trouble financing your brokerage account and have a good stock idea that may not last long, this is a viable option. Some brokers do not allow the purchase of stocks for immediate delivery. As a result, you must be familiar with the terms. If you utilise the margin facility, the broker will charge you an annual interest rate of 16-24%. This is in addition to the brokerage and other transaction fees charged while trading.


To avoid such fees, as previously noted, you can fund your account immediately. If the position you took begins to lose money and the obligation exceeds the margin supplied, you must bring in additional margin. If you do not, the brokerage has the authority to sell the securities pledged to cover the losses as well as recoup the interest owed. A prudent use of capital and leverage can assist you in trading smoothly.

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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