Zee Media Bureau
A Demat account or dematerialized account converts the shares from the paper form into an electronic form. They are similar to pass books offered by the banks where you have opened an account. You can easily buy or sell shares of different companies using your Demat account. All the transactions are entered into it akin to the bank passbook.
However, there are certain things you need to keep in mind before opening a demat account:
1.Brokerage charges and hidden costs
Every time you buy or sell stocks, a certain brokerage is asked for by the demat account provider. The fee can be either in fixed amount or percentage term. You can understand it by the way of this example. If the demat account charges brokerage of 0.10 percent, you will have to pay Rs 1 for Rs 100 worth of stocks purchased. Nevertheless, the fee to trade in derivatives and mutual funds is separate.
Other than this there is an Annual Maintenance Charge (AMC) or administrative charge. The fee, currently, may vary anywhere between Rs 300 to Rs 500.
In addition, if you are holding your stocks in paper form and want to convert them to demat form then a certain fee is required called demat charge. Some brokerage houses also ask for advisory fee and statement charges.
Technology aspect plays the most important role in trading. Hence, you must be properly informed about the technology being used.
For a serious investor, technology plays the most important role than even the brokerage charges.
What should a good technology offer?
- Real time details related with stocks
- Bid and ask price
- Margin money, if any
- Cost of portfolio
- Financial data, history, important events and possibly a quick analysis on the company
3.Separate bank account
It is always advised to open a new bank account for trading purpose since various transactions other than buy and sell happen on a continuous basis during trading hours. Hence, keeping a separate account, other than savings and salary account, makes it much easier to track monetary transactions.