The stock market has proven to be a viable investment option over the last few years. Although it has its own set of risks, the returns on the investment is are extremely attractive, especially with the right market conditions.
Therefore, it comes as no surprise that plenty of individuals are now turning towards this market to invest their funds for better returns. As a part of this process, an investor would need to possess certain investment instruments. One of these includes the Demat account. This account works and functions in the same way as a regular bank account. Through this account, you can store the shares which you have either sold or purchased.
As a part of investing in the stock market, it is mandatory that you open this account. While it may seem as simple as opening a bank account, here are certain factors you will need to be aware of before you begin the application process. Here are some of the important features of the Demat account you need to be aware of:
Look out for brokerage charges and hidden costs:
Any time you purchase or sell stock, your Demat account provider will ask for a certain brokerage fee. This fee can be charged either in a fixed amount or percentage form. For example, your Demat account provider charges you a fee of 0.1%, you will need to pay Re 1 for every Rs.100 worth of stock you purchase. While this may seem like a small amount, the larger the amount of the stock, the larger will be the fee. Nevertheless, normally the fee to trade in derivatives and mutual funds is separate. In addition to this, you must look out for the annual maintenance charges, also known as administrative charges. This amount can vary in between Rs. 300 to Rs. 500 depending on the financial institute you are investing through. Apart from this, some of the additional hidden costs you need to be aware off include advisory fees and statement charges, in addition to the charges for rematerializing or dematerializing your stocks.
Technology platform used during the investing process:
The platform that is used to stock market trading is an important choice. In today’s day and age, this is no different, especially with the technology that is used to trade. Therefore, as a serious investor, it is important that you be aware of the technology that is being used when you begin your trading. In order to ensure that you get the best out of the technology that is being used, you should check your platform offers:
• Real-time details relate with stocks
• Clear details on bidding and asking price
• Details on margin money
• Clear details on costing of portfolio
• Financial data, history, important events and possibly a quick analysis on the company.
Creating a separate bank account:
Using a combined bank account may be beneficial and convenient to use when trading. However, it is advisable to open a new bank account for trading purposes. The reason for this is because you will need to purchase and sell stock on a continuous basis during trading hours. Keeping a separate Demat account, other than savings and salary account makes it much easier to track alternate monetary transactions.