If you are contemplating stock market investments then as per SEBI guidelines you are mandated to open a demat account. A demat account dematerializes your physical share certificates into electronic/digital certificates. It also holds other securities like debentures, gold bonds, ETFs, mutual funds etc in electronic format.
Opening a demat account is not an uphill task. If you do not know how to open a demat account then there are a large number of websites that will run you through the process. You can also get information from your investment manager or financial advisor.
You can open a demat account online at zero cost. Scanned copies of your PAN, address proof and bank account details are all you need to successfully complete the application process.
With a proliferation of Depository Participants (DPs)/brokerage firms in the market, the million dollar question is who is the best stock broker to open an online demat account. However, the answer to this question is subjective. It depends on your investment style and risk-return profile
Let us now discuss certain parameters that you must consider while zeroing in on a suitable broker for opening an online demat account.
Parameters for evaluating a broker
1. Process for IPO investments
If you are interested in participating in Initial Public Offerings (IPOs) then you should choose a broker who has the simplest IPO form submission process. Easy investment procedures are necessary for such critical investments.
Most brokerage firms specify some eligibility criteria for participating in IPOs. If you qualify for IPO participation, you should register yourself for IPO notifications with your broker. Your broker will notify you whenever an IPO suiting your investment profile is on the horizon.
Boutique brokerage firms owing to their small size and client base will facilitate purchase of pre-IPO shares. However, boutique brokers are riskier than well-known large-sized brokerage firms.
2. Trading volume
If you are a small investor with low trading volumes and interested in tax-saving and long term investments, then you should go for a broker who offers a multitude of subscription plans following the flat-fee pricing structure.
Moreover, a broker collecting relatively lower brokerage fees as compared to other market players and offering investment advisory services will be the best bet for you. Some DPs do not charge brokerage for delivery trades which are ideal for small investors.
If you are a professional and do not need financial advice then a discount broker will suffice.
3. Intraday Trading Charges
Intraday trading is a process wherein buying or selling of shares happens within the same day. Margin buying, short selling and lower brokerage costs are the intrinsic features of Intraday Trading.
Most of the brokers try to convince customers to do intraday trading because it is the prime revenue generator for demat account service providers.
Even though intraday trading attracts lower brokerage fees than delivery trading, it requires a robust online trading platform. Brokerage houses mainly charge for this online trading infrastructure. The pricing depends on the number of value-added features on the trading platform and ease of executing trades.
If you are very concerned about the safety of your money once you make a transfer into your trading account, investment banks are the best brokers for you.
Moreover, if you want to access banking as well as demat account services with a single ID and password, then bank-based brokers are most suitable for you.
5. Brokerage costs
Always choose a broker offering low brokerage subscription plans tailor-made to your investment-style.
On the basis of these parameters, choose the best broker.