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One of the mandatory requirements for entering the stock market, is a demat account. Demat or Demateralized account can be opened with any broker. It is used to save all the securities or shares that you purchase from the exchange.
Demat account is flexible in the sense that it also allows you to hold other investment instruments like mutual funds and bonds. The broker provides comprehensive reports of your trading / investment activities and periodic statement to allow you to review your investments.
The choice of demat largely depends on the broker you choose and the services provided but apart from that below are 5 pointers to bear in mind before opening a Demat account.
Type of Broker
You need an authorized/licensed broker to execute your buy and sell transactions. There are two types of brokers, Full-service broker, and a Discount broker.
Full- Service Broker – These are traditional brokers. They provide the entire suite of financial services which an individual might need. They have huge research teams to provide their clients with reliable trading and investment calls. Customized services as well as personalized portfolio management are also part of their service portfolio.
Discount Broker – This is the new breed of broker which the advent of technology has given birth to. They are technology companies offering trading and investment platforms.
Brokerage Charges
This is an important consideration while selecting a broker. Some brokers may waive off the demat account opening charges but it’s the transaction charge which one needs to carefully look into. These vary from broker to broker.
Most brokers offer different pricing plans to suit the needs of all investors but a flat pricing plan is perfect. Flat pricing reduces the hassle of calculating the brokerage. There is also an option for “Volume-linked pricing” where the brokerage goes down as the volume of trade goes up. These type of flexible plans can only be available with a full-service broker.
Nomination
In case of your demise, the demat account and its investments are the transferred to the person you nominate. It is important that this person is aware of your financial goals and is in sync with your financial journey.
Online Access and Software
In today’s fast moving age, you must have a good idea of the kind of software and access the broker provides. It should be robust, easy to use and understand.
Support
Despite the advanced use of technology things might go off road once awhile. You need a broker with a hands-on customer support team who is available whenever you need them.