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The Demat account is the abbreviation of 'Dematerialized Account'. It is a digital or paperless way to buy and sell stocks and other financial instruments. It as mandatory to open demat account for trading in shares in India. Any investor wishing to buy and sell shares must open a demat account.
Following points that one should look before opening a demat account:
1. Brokerage charges and AMC:
Every time you buy or sell shares, the demat account provider asks for particular brokerage amount. The rate can be in a fixed amount or as a percentage. If the demat account charges a 0.10 percent commission, you will have to pay Rs 1 for the Rs 100 value of the purchased shares. However, the rate for trading in derivatives and mutual funds are separate. In addition to this, there is an Annual Maintenance Charges (AMC) or administrative fee. The rate, currently, can vary between 300 and 700 rupees.
2. Technology and trading platform:
The trading platform or website is equally important. Even if people open a demat account based solely on brokerage costs, the technological aspect of the demat account should not be ignored. A good technology platform should give you security and consistency, should not be inactive at the time of live market, should be easily navigable and should not delay loading. In fact, if you are a serious investor, technology should be more important than brokerage commissions.
3. Bank Account details:
In order to make Demat account to be fully operational, you need to attach it to your bank account. Bank A/C will be used to transfer funds and receive dividends from your shares. If you have not provided the correct details of your bank account or have provided an A/C bank that is not connected to your demat account, then you cannot carry out exchange transactions.
Banks like ICICI, Axis, IDBI, HDFC and Kotak are providing 3 in 1 service by which you demat account, trading account and saving account will be opened with them. This 3 in 1 service is a very good to get rid of transfer of funds related problems.
4. Online access:
Most important thing you need to keep in mind is online access and software. The software that you use or the kind of options available for online execution of transaction should be easy for you. For example, broking firms like Share Khan provides Trade Tiger trading software and Zerodha provides Kite and Pie trading software.
The back-end support of your Depository Participant (DP) is essential for a better investment in the stock market. During your investment, you may face many problems for which you need your support team to help you. Sometimes it may be necessary to make a phone call. If your DP does not provide these services, you may have problems. Make sure you have back end support for your DP.
There are more than 500 depository participants are available in India and one can contact to open a demat account, before selecting the depositary participant, you must research and then open the demat account.