Best Demat Account for Beginners

Published on Thursday, April 11, 2019 by Team | Modified on Tuesday, November 16, 2021

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Beginners or new traders to the stock market are often confused with the plentiful choices available in demat accounts. This article discusses features of best online demat account and helps find the best demat account for beginners and new traders.

Indian stock broking industry has grown by leaps and bounds in the last decade. Today you have a lot more choices in trading services. As a new trader, you need to find the best demat and trading account so that you get good trading experience while bringing down the trading costs down.

Why you need a Demat Account?

For trading in stock exchanges, you need a trading account, demat account and linked bank account. Many beginners confuse between trading and a demat account. A demat account is different from a trading account. A Demat account is a must for online trading in exchange-traded instruments like stocks, commodities and currency. You would also need a Demat account if you wish to invest in IPOs, Bonds and Mutual Funds. A demat account is like a bank wherein you hold your various securities stocks, bonds and mutual funds etc., in electronic form.

Important Things You Must Know About Online Demat Accounts

  • In India, National Securities Depository Ltd (NSDL) and the Central Depository Services India Ltd (CDSL) are the 2 central depositories entrusted with the responsibility of opening and managing accounts.
  • Your stock broker only acts as an intermediary between you and the central depository. The broker needs to be Depository Participant (DP) with any of the central depositories to offer Demat Account Opening and other services.
  • You have to pay Demat account charges to the central depository and your brokers. Most of the fees like transaction charges are charged on per transaction basis while there are some fees like AMC (Annual Maintenace Charge) to be paid yearly. Some brokers also charge a fee on the opening of a Demat account.
  • SEBI has mandated all DPs to offer Basic Services Demat Account (BSDA). This online demat account facility offers limited features but charges zero AMC for holding securities value up to Rs 50,000. The AMC on BSDA for the value of holding from Rs 50,001 to Rs 200,000 AMC will be up to Rs. 100.

Trading Needs of New Traders or Beginners

It goes without saying that new traders have different trading requirements than experienced traders. Major trading needs of new traders are-

  • Limiting the trading costs to a minimum

    Most of the new traders want to see how the stock market works. And a lot of people drop out midway while many find the world of stock market fascinating and an excellent way for wealth generation. So, as a new trader, when you are starting, you need to keep your trading costs to a minimum. Demat account charges constitute a significant part of your trading costs. You have to pay Demat account opening fee, AMC, transaction fees and taxes etc., as part of demat account charges. So, if you can cut down your demat costs, your trading costs will be low.

  • Limited trading requirements

    Most of the new traders invest in small amounts and start with investing in stocks, mutual funds and IPOs. They later move to complex instruments like derivatives, commodities and currency. They also look for easy to use online trading software so that they can place buy/sell orders with ease. Also, their trading turnover is less than experienced traders.

Now as a new trader, you need to find the best online demat account that perfectly meets your specific trading needs.

Tips on finding the best demat account for new traders

1. Start with a BSDA demat account

A BSDA demat account can help you save money on AMC and other fees. So, if you plan to invest only up to Rs 50,000 then you have to pay zero AMC on your Demat account. In case, you want to invest later then you can convert your BSDA demat account to a normal demat account and pay regular charges. By opening a BSDA demat account, you are not committing yourself to high charges of a normal demat account but at the same time retaining the flexibility to convert it into a normal demat account, if the need arises. BSDA demat accounts are offered by all full-service and discount brokers including ICICIdirect, ShareKhan, Zerodha, Upstox etc.

2. Look for no AMC Demat Accounts

Many stock brokers offer zero AMC Demat Accounts wherein the AMC charges are waived. Some brokers offer limited time no AMC demat accounts like first year no AMC demat account while some offer a lifetime no AMC demat accounts. So look around for brokers offering lifetime zero AMC demat accounts.

Review and Compare Demat Accounts

When you spend some time reviewing brokers, you will find that many stock brokers offer zero AMC demat accounts and you will be confused as to which one to choose. The best way to find the best demat account in India for yourself is to review and compare demat accounts.

Finding The Best Demat Account for Beginners (New Traders) may require some effort and time but it is worth the effort. This will help you bring down your trading costs while giving you a good trading experience.

Key Takeaways

  • New traders or beginners need to be careful in choosing a demat account as it may impact their trading expenses and experience.
  • BSDA demat account facility offers limited features but charges zero AMC for holding securities value up to Rs 50,000.
  • Many stock brokers, full-service as well as discount brokers, offer zero AMC Demat Accounts wherein the AMC charges are waived for a limited time or lifetime.
  • Comparing demat account features of various brokers is a must to find the best demat account for beginners.

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