How to Open A Demat and Trading Account in India?

How to open a demat and trading account in India?

Trading stocks, shares, securities, gold bonds, and other stuff has become easier than ever with the introduction of digital trading platforms. Along with a trading account, you need a Demat account to buy hold, and sell stocks. So, in this article, we will learn what a Demat account is, what are the documents needed to open a Demat account, how to choose a broker for opening Demat account, and many important points, so read the article till the end.

What is a Demat account?

Remember how trading used to be in old days? Everything was done on papers such as bonds and others, now in the digital era we use a Demat account to hold an investor’s shares and securities in electronic format. Demat is short for “dematerialized”, which means that all the shares, commodities, securities are converted from physical form to electronic form and stored in one place.

In India, depositories such as NSDL and CDSL provide Demat account services but we can’t access them directly, we need intermediaries, depository participants, or more fondly known as stockbrokers to access these services. These stockbrokers may charge investors a small fee for opening a Demat account is known as the DP charges depending on the volume held in the Demat account or terms and conditions between the broker and investor. A Demat account is capable of holding:

Shares, Stocks, E-Gold, Bonds, Government Securities, IPOs, Exchange-Traded Funds, Mutual Funds

If you would like to gain more knowledge in the stock market world then click here to read our article on the Top 10 Books You Must Read as a Stock Market Beginner.

Do I Need a Demat Account?

Yes! You absolutely need a Demat account if you plan to invest in the stock market. It acts as a place to store all your shares, securities, mutual funds, and others digitally. And when the time is right you can access all your stuff from your Demat account and sell it to make a profit. It eliminates the need for the investor to hold all their property in physical form.

Documents Required for opening Demat Account

1. Proof of Identity (POI) such as driver's license, voter ID, PAN card, AADHAAR card.

2. Proof of Address (POA) such as voter’s ID, driving license, AADHAAR card, electricity bill.

3. Proof of Income (only if you want to trade in F&O and commodities) such as ITR acknowledgment, bank statement.

4. Proof of Bank Account such as bank passbook, bank statement, canceled cheque.

5. Compulsory PAN Card

6. 1 to 3 recent colored passport size photos.

Steps to Open Demat Account

Steps to follow to open a demat account.

1. Select your preferred Depository Participant (Stockbroker)

This is the first and most important step while opening a demat account. You have to first figure out the needs and services that you would like and the kind of investments you are going to make and based on that you have to compare various stockbrokers and select one.

Read this article till the end where I have explained how to select a Depository Participant (Stockbroker).

2 Fill Application Form

You will have to fill in a form and also do your KYC by submitting all the required documents.

3 Verification

You will have to go through a list of rules and regulations to ensure ethical and legal trading and agree to them. The DP (Broker) will conduct a verification of your documents and you have to pay the fee depending on your broker.

4 Final Step

Once all your documents are verified, you will have successfully opened your new Demat account. You will also be given the Unique Identification Number for your Demat account.

The same steps are applicable for opening a Demat account online. Just go to your preferred stock broker's website and put in your phone number, city and, you will get an OTP and asked to continue with the KYC. The next steps are the same as above.

The Benefits of Opening a Demat Account

Know the benefits of demat account before opening a demat account.

Easy Holdings

To hold all the certificates, commodities, gold, and other things in the physical form, maintaining them, and tracking their progress is very difficult. Hence, the Demat account makes it very easy by dematerializing them into e-form.

Risk-Free Holdings

Since all your holdings are safely stored in the electronic form in your Demat account, they are safe from the risk of theft, loss, and damage.

Low Costs

Physically dealing in stocks involve stamp charges, handling charges, and bond charges, which are completely eliminated by the Demat account.

Save Time

Demat eliminates a lot of paperwork thereby facilitating the investor to make more purchases or sell easily in an efficient time frame.

How to Choose a Broker to Open Your Demat Account?

Before opening a demat account you should know how to  choose a stock broker?

Before we get into the particulars, we should know that there are two types of brokers known as discount brokers and full-service brokers. A discount broker will only listen to your instructions and carry out the transactions.

On the other hand, full-service brokers will provide you with an analysis of your stocks and offer you opportunities to invest in IPOs, mutual funds, and others. Zerodha, Upstox, Angel Broking, ICICI Direct, HDFC Securities, Kotak Securities, Axis Direct are some of the top full-service brokers in India.

Now coming to the factors that you should consider while selecting your DP for opening a Demat account.

Factor 1: What Kind of An Investor Are You?

Are you looking to invest minimally just for a few bucks or do you see yourself doing investing as a full-time job? Figure out if you want to do intraday trading or inter-day trading. Also, do you want to stick with just the stocks or want to try your luck with securities, commodities, etc.

The next important thing is what are your financial goals. Are you thinking of saving up for retirement? In that case, you have to do long-term and secure investments. If you want to create wealth in a short time, you have to look for some risky investments.

Factor 2: Can You Trust the Stock Broker?

The first and foremost thing you have to look for is if the stockbroker is registered with SEBI and complies with all its rules and regulations.

Check if the stockbroker is a member of the Financial Industry Regulatory Authority (FINRA)

Check whether the brokerage is covered by the Federal Deposit Insurance Corporation (FDIC) and lastly if they provide any guarantee protection against fraud. A word with its current customers will be helpful.

Factor 3: How Secure are My Investments?

Since most brokerage firms are now online it becomes very crucial that the firms have strong firewalls and anti-theft measures against any online frauds. Some things such as two-step authentication are very important. Also, it is important to know if the firm sells the data of their customers to any third party.

Factor 4: Commission

Every broker makes a certain amount of commission on every trade you make using their platform. Since these cuts are unavoidable you have to compare the commission rates of various platforms such as Upstox, Zerodha, and others to get a fair idea.

Click here to read our article on the best stockbrokers in India in which you can find the commission rates policies and everything that you would need.

Personally, I would like to suggest you to go with Upstox, India's fastest-growing stockbroker. By opening the Demat account with Upstox, you will get multiple investment opportunities like gold, stocks, mutual funds, IPOs, and future and options as well and it has an easy, fast and simple interface that means it will be the best for you if you're a trader. If we talk about the charges, then it charges rs.20 on per order in intraday and it doesn't charge anything in delivery. So, why being late take your first step towards the investment world with one of the fastest-growing stock brokers in India. Click here to open the Demat account now.

How to open a demat account with upstox?

Final Verdict

The stock market as always has been lucrative and attracting investors continuously. If you have read the article until here implies that you are ready and prepared to start investing, I don’t have much to say other than happy investing! And hey if you are ever in the mood, click here to see some amazing stock market-based movies to give you an extra nudge of motivation.

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