Investing in share markets provides an opportunity to multiply wealth is a shorter duration of time as compared to other investment options. To start investing, one needs to open a demat and trading account with a stockbroker. Any SEBI and exchange registered entity can help open a demat account.
Opening a Demat Account
Now it is possible to open a Demat account online through stockbroker’s website, without any paperwork. All you need is to fill an account opening form, provide your basic details and upload soft copies of the PAN, Proof of Address and Proof of Identity. You can perform an in-person verification to authenticate that it is ‘you’ and not someone else applying on your name. For this, record a short video of yourself and submit. Once your application is verified, and everything is in place, your demat account will be opened and you will receive the 16-digit account number along with login credentials.
Benefits of Demat Account
Demat Account provides many benefits to an investor. Here are some key benefits of Demat Account:
- Safe storage: The shares are stored in digital format in a demat account which is safe and secure.
- Access anytime: You can view your holdings anytime just by logging into your demat account
- Store multiple investments: Demat account can hold bonds, Exchange Traded Funds (ETFs), mutual funds as well besides shares
- Easy pledging of shares for Loan Against Securities: Since all your investments are at one place it becomes easy to pledge the securities while applying for loan against securities.
Given the various benefits of Demat Account, the usefulness of demat account is evident. However, to provide the demat services, certain technologies and resources are put in place and hence there are some charges associated with using the services of demat account. Compared to the benefits, the charges are menial. Let’s look at the charges associated with Demat Account.
Demat Account opening charge
The first charge associated with the Demat account is the charge for opening a Demat account which is called Demat account opening charge. The account opening charge differs across the stockbrokers. The fee may vary from Rs.300 to Rs.2500. Some may also provide the option to open a free Demat account also. Just be wary to go with a credible broker with an established brand name. Since you are going to invest your hard-earned money, do choose to invest with a stockbroker that you can trust.
Demat Annual Maintenance Charge
Demat Annual Maintenance charge, also known as Demat AMC is the charge associated with maintaining your account and is levied by the stockbroker. Demat AMC can be charged annually or quarterly, depending on the stockbroker. It’s a recurring cost levied on your demat account. The charge may vary across stockbrokers. Some brokers waive off the Demat AMC for an year and is chargeable only from the second year.
Demat and Remat charges
These are the charges associated with the dematerialization and rematerialization of shares. Dematerialization is converting physical shares to digital form; its opposite is called rematerialization. Brokers charge a certain fee for these services which is a part of demat charges. Before opening a Demat account you might take a look at the demat & remat charge by a stockbroker. Typically, it can be around Rs. 25 to 5o for each share, excluding the taxes.
Once you start buying and selling shares, you will incur a cost called brokerage which the stockbroker levies on each transaction. It is a fee for the services rendered by the broker. Therefore, full-service brokers who offer the services of research, analysis and advisory along with the Demat account will charge a higher brokerage, typically a percentage of the transacted value. Discount brokers on the other hand will charge a flat fee per order irrespective of the transaction value.
Disclaimer: Investments in securities market are subject to market risk, read all the related documents carefully before investing.