It is necessary to have a Demat account to trade on the stock market. It is like a bank account for your equity. It holds your shares in custody, just like a bank account holds money. Hence, you must open a trading account with an authorised Depository Participant (DP). And since there are a lot of registered DPs, it is essential to choose the right one.
But what things do we consider before the Demat Account opening? Read on to find out the answer to that question and learn about some important things about a Demat account. Here are essential things to look for before opening a Demat account:
● Credentials: Before opening the account, you must ensure that the broker you choose is trustworthy. Take the time to learn about the DP’s history, including the number of customers they have, how long they have been in business, and how many branches they have. Additionally, ensure that the broker is SEBI registered because it makes it easier to file a complaint if there is fraud or a lawsuit.
● Service Charges: It’s crucial to figure out how much it will cost to open a Demat account online and access it. One of these is the Demat account fees of opening an account, which can differ with different providers. A maintenance fee is also charged each year for online and other services that can be used with the account throughout the year.
Some even charge a fee for each trade, with the option of getting a discount on the brokerage. If you open an online trading account at ICICIdirect, the Annual Maintenance Charge (AMC) is Rs. 700 for the first year.
● Security: Your Demat account will hold securities that could be worth your entire life savings. Because the data keeps moving between servers, it is important to ensure that the DP has set up the highest level of safety and encryption for your Demat account. Any attack on your data and information that isn’t authorised or ethical can cause trouble. So, before choosing a DP for your Demat account, ensure it has high-grade encryption.
● Ease of Opening: Nowadays, opening an online trading account is effortless and hassle-proof. Many DPs offer an easy, paperless way to open a Demat account online. You should always choose a depository participant that makes opening an account easy and doesn’t require contact.
● Brokerage: You can choose your Demat provider and broker according to SEBI rules. You can have both accounts with one company or two other firms. But to make investing easier, getting both services from the same company is best. This increases the efficiency of transactions since it makes it simple for one company to handle tasks like issuing Debit Instruction Slips and resolving trading-related difficulties.
Review 5 Important Things to Look For Before Opening a Demat Account.