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Things To Consider When Opening Demat Account

The stock market has been one of the most promising ways to multiply our wealth. You might have heard people talking about the benefit of compounding and investing early. And if you also want to make lots of profit in the stock market, you need to have a Demat account to invest in it.

There are a lot of stockbrokers that will allow you to open a Demat account in their firm. However, before opening a Demat account, you need to understand what it is and what are the different charges that you will have to pay while opening it.

What Is Demat Account

A Demat account is like a bank account that holds your cash and shares in its custody. Demat stands for the Dematerialized account and holds all your stocks and securities, like bonds, fixed deposits, mutual funds, and Exchange Traded funds (ETFs).

With the rise of the internet and evolution in technology, traders and long-term investors nowadays hold their securities in an account called Demat managed by online brokers. While some of the online brokers offer zero brokerage trading, some claim to be free but have some hidden charges.

Need To Open Demat Account

To buy and sell the securities, you need a Demat account. Without this account, you won’t be able to do any transaction in the stock market. So to trade or invest in equities, ETFs, Debts, and bonds, you will need a Demat account. This will provide you with a digital platform that will help you to store shares with maximum security against any fraud, loss, and damage.

Requirements To Open Demat Account

Open a Demat account just like opening a bank account easily in a few steps. You need to check all the required documents and keep them ready to open a Demat account.

Account Opening Charges

There are several charges asked to pay while opening a Demat account. They are:

1. Annual Maintenance Charges

This annual maintenance charge is taken at the start of at least one year to open your account in advance. This charge later provides you with the account services according to your demand and helps in operating the Demat account. Usually, it varies from INR 400 to 800, and some of the popular brokers may charge you more.

2. Account Opening Charges

Every broker has different account opening charges, and this fee depends on their services, structure, and overhead costs.

When you start finding traditional banks and brokers to open your account, you will learn that discount brokers charge a very low cost to open your Demat account.

3. Transaction fee

Online brokers usually impose a fee on every transaction that you do on the exchange. This transaction fee varies depending on the units of shares and the value of the transaction. This affects the total charges of your transaction. Some of the firms are there, which do not charge much and help you to reduce the profit while trading.

There are some more charges like custodian fees and depository participant charges that you need to keep in mind.

Documents Required to Open A Demat Account

Some of the documents, which are required while opening your Demat account as identity proof. You must have your identity proof with photos attached to them, such as a PAN card, Aadhaar Card, Passport, Voter ID, or driving license.

Another important document is your address proof. You are asked to give proof of where you live and where you are from. Thus, submit your address proof, whether it is a ration card, electricity bill, or bank passbook.

Advantages Of Opening Demat Account

Demat account has several advantages, such as

  • It makes the trading life of investors and traders very easier, as it has initiated paperless working in the trading world.
  • When you start trading, a Demat account will provide you with detailed transaction information and update them on your account automatically. This happens every time you place an order to sell or buy the shares. You don’t have to do it manually, and thus, this saves you a lot of time.
  • If you have multiple banks or trading accounts, it doesn’t matter because Demat helps you to keep all the transaction details in a common account.

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