You must be familiar with stocks, but do you know what’s a demat account? To buy and sell stocks you need a demat account, trading account and a bank account. A demat account is just like a bank account. While money is stored in the bank account, shares are stored in the demat account. Shares in the demat account are in dematerialized form. It is the process of converting physical shares to electronic form. You don’t need shares to open a demat account. A demat account can be opened with no shares.
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Let’s take a look at the charges in a demat account. Demat accounts have nominal or nil charges. It’s wise to open a 3-in-1 account which is a savings bank account, demat account and a trading account. While shares are stored in the demat account, you require a trading account to buy and sell shares.
Depository participants, DPs, and banks keep your shares safe. DPs are the agents of depositories like NSDL and CDSL. Your demat account must be opened with a DP and a depository is like a bank which holds the shares. DPs and banks charge a custodian fee to keep your shares safe.
Basic Services Demat Accounts (BSDA) with a balance (holding value) up to Rs 50,000, do not have annual maintenance charges (AMCs). For holdings worth Rs 50,001 to Rs 2 Lakhs, you have to pay around Rs 100 to Rs 750, based on the number of transactions you make. If the value of transactions is over Rs 2 Lakhs, annual charges would be above Rs 2,000. Depository participants have transaction charges which would be around Rs 1.5 for every share you trade.
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If you want to invest in stocks online, get an online broking account. There are a number of brokerages like angel broking, edelweiss financial services, Zerodha and sharekhan. You can also look at HDFC Securities, ICICI Direct, Axis Direct among others.
You can choose between a discount broker and service broker. The discount broker carries out trading instructions vis-à-vis equities and derivatives. It carries buy/sell at reduced commissions. A service broker in addition to all this offers seamless investing options on its platform for IPOs, mutual funds and even insurance products. A service broker gives research reports on stocks and sectors to make investments. Most of the broking firms around are service brokers.
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