Published on Monday, April 8, 2019 by Chittorgarh.com Team
If you are a new investor or a small investor, you must be looking for a top stock broker for small investors in India to lower your trading costs. This article discusses the needs of small investors and how to find the best stock broker for small investors in India.
There is no standard definition of a small investor. For this article, we will define a small investor as someone who either occasionally buys stocks or someone who trades securities worth a few lakhs every year. A small investor is a retail investor who buys stocks for his personal wealth creation.
The trading needs of small investors are very specific. As they trade in low volume, they wish to lower their trading costs to a minimum. Here are some of the common trading needs of small investors-
Small investors trade in small volumes. Naturally, the profit in their trades is also small. When your trade value is in thousands, the profit, most of the times, is in a few hundred. Now, if they pay high brokerage charges, their profit gets further eroded. So small investors need low brokerage stock brokers.
A trading and a demat account are mandatory for trading in exchange-traded securities. The trading account gives you access to stock exchanges and trading platforms to place buy/sell order. The demat account is an online repository to hold your securities in electronic form. Both these accounts have 2 types of charges- Opening Fees charged at the time of opening the account and AMC (Annual Maintenance Charge) charged every year by brokers for maintaining the accounts. Small investors must look for stock brokers who can reduce these expenses.
Another major requirement of small investors is free and easy to use trading platforms. They don't need advanced trading platforms. Any fee on trading platforms will increase their trading costs. So they need to find the best stock broker for small investors in India who can offer them free trading platforms and tools.
You will be amazed by how a few hours of online research can help you save a significant amount in trading costs. So, here are a few tips for small investors to reduce their trading costs-
The stockbroking industry is highly competitive. Stock brokers, both discount and full-service brokers, come up with attractive promotional offers to attract traders. Look for brokers offering accounts with 'zero account opening fee' and 'lifetime free demat account'. You can also lower your demat account charges by opening a BSDA (Basic Service Demat Account) wherein there is zero AMC fee on stock holding up to Rs 50,000. The AMC for holding value above Rs 50,000 but less than Rs 1 lakh is Rs 100 per year. So, if your trade turnover per year is with Rs 1 lakhs then a BSDA demat account can significantly lower your trading expenses. BSDA facility is offered by all brokers like ICICIdirect, Axis Direct, SAS Online and Trade Smart Online
If you are in a percentage based brokerage plan then chances are you may be paying a higher brokerage in comparison to what you might have been paying in a flat brokerage plan. Online discount brokers are a new type of brokers who have introduced the concept of low and flat brokerage plans. They charge a fixed brokerage fee irrespective of trade value. Zerodha charges Rs 20 per executed order while 5paisa charges Rs 10 per executed order irrespective of the trade value. So, if you are buying stocks worth Rs 5000, you will pay Rs 10 to Rs 20 as a brokerage fee. In a percentage based brokerage, brokers charge in the range of 0.25% to 0.75% on every order. So, for a trade of Rs 5,000, you will be paying Rs 12.50 to Rs 37.50. These days facing serious competition from discount brokers, many full-service stock brokers have started offering both flat and percentage based brokerage plans.
Most of the brokers like Kotak Securities, Fyers, offer free trading platforms. As a small investor, you would also need simple to use trading platforms. To find such a trading platform, research on a few brokers, read the broker and trading software reviews and then find a platform best suited to your needs.
Comparing various brokers on the above parameters will help you surely find the best broker for small investors in India.
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