3 simple steps to get started in the Indian Share Market-
Get the documents Ready
Prepare the documents required to open demat and trading accounts.
Select your online broker
Find the best stockbroker which meets your requirements.
Apply to open your account
Fill the application to open your demat and trading account.
Quick Note: Things to know before you get started
1. What is the difference between Demat and trading account?
Trading Account: A trading account is a medium to buy and sell shares in a stock market. In simple words, it is used to place buy or sell order for a stock in the market.
Demat Account: Demat account in the short form for ‘Dematerialised account’. It is similar to a bank account. Just as money is kept in your saving account, similarly bought stocks are kept in your demat account. It serves as a facility where stocks bought are deposited and the stocks sold are taken away.
Demat account is used only for the storage of stocks, not for transactions (buying/selling).
Read more here- Demat vs Trading Account
2. What kinds of online brokers are present in India?
Now, there are two types of stockbrokers in India:
- Full-service brokers (Traditional Broker)
- Discount brokers (Budget brokers)
Full-service brokers- They are traditional brokers who provide trading, research & advisory facility for stocks, commodities, and currency. These brokers charge commissions on every trade their clients execute as a percentage of each trade executed. They also facilitate investing in Forex, Mutual Funds, IPOs, FDs, Bonds, and Insurance.
Few examples of full-time brokers are ICICIDirect, Kotak Security, HDFC Sec, Sharekhan, Motilal Oswal etc.
Discount Brokers: Discount brokers just provide a trading facility for their clients. They do not offer advisory and suits for a ‘do-it-yourself’ type of clients. They offer low brokerage, high speed and a decent platform for trading in stocks, commodities and currency derivatives.
Few examples of discount brokers are Zerodha, ProStocks, RKSV, Trade Smart Online, Achiievers, SAS online etc.
Read more here- Full-Service broker vs Discount brokers in India
Step 1: Get Your Documents Ready!!
For opening a demat and trading account, the following documents are required:
- PAN Card
- Aadhar card (for address proof)
- Passport size photos
- Canceled cheque (or front-page of passbook)
In addition, you’ll also need a saving account to link with your brokerage account to transfer funds (when you buy or sell shares). You can have your savings account in any private/public Indian bank.
Else, many brokers also provide the facility of 3-in-1 account- where you can open all three- Saving account, demat account and trading account with the same bank/broker.
Step 2: Select your online broker
In this section, we will walk you through the factors that you need to check before choosing your stockbroker.
The biggest advice- Do Your Research:
Conduct your own research. Listen to the advice of the experienced investors/traders but do not follow them blindly. You can carry out your own research by visiting various stockbroker’s website. Get a general idea about the stockbroker, account opening charges, facilities offered etc.
The factors to choose your stock broker:
1. Background & reputation of the broker:
Check the background of the stockbroker and their reputations. You can inspect the reviews, complaints and have a survey of the personal experience by the existing users. If you are going to use the mobile platform, check the mobile app ratings on the app/play store.
2. Brokerage and other charges:
Stockbrokers are the registered members of the stock exchange and they can directly buy & sell shares in the share market for their clients. They charge some commission for offering this facility known as brokerage charge.
Now, there are two types of stock brokers in India: A) Full-service broker & B) Discount broker.
The full-service broker provides advisory service along with the trading platform. These brokers charge commissions on every trade their clients execute as a percentage of each trade executed. Discount brokers only provide the trading facility. They offer low brokerage and charges a flat fee per transaction.
Choose a suitable broker according to your preference. If you want stock research advisory, go to a full-service broker. If you just want trading facility and do not want to pay extra commission, go with a discount broker.
3. Customer Services:
If you are new to investing/trading, you will require a lot of customer service, unless you have a guru or advisor. Check the customer service provided by the stockbroker. An easy way is to try calling their customer care helpline number. If it takes years for the customer executive to pick up the phone, then avoid that stockbroker. Further, if you want a one-to-one customer service, then check the website of the stockbroker if they provide personal services.
4. Trading platform:
This is one of the most important factors to examine. Inspect whether the trading platform offered is friendly and easy to use. Check the demo videos of the trading platform on youtube.
5. Advisory & research facilities:
If you are not planning to invest in your own and need advisory, then check for the facility offered. The reliability of the advisory is a must to check. The stockbroker should have a good reputation in advisory and research works.
6. The range of facilities offered:
If you are looking for diversified investment and planning to also invest in other options like mutual funds, bonds, currencies, FSs etc, then check if these range of facilities are available with your broker or not.
7. Hidden Charges:
There should be no hidden charges and all the charges incurred while transactions should be specifically mentioned. Asked for any hidden charges with your customer care executive before selecting the stockbroker. Transparency is the key to any service.
8. Fund Transfer:
Easy linking facility with your saving account should be available. Ask for the fund transfer process in your stockbroker. Online money transfer and withdrawal should be fast and easy.
9. Tools of education:
Many stockbrokers provide education facility. For example, Zerodha educates its clients via ‘Varsity’ and its blog for free. If you are in the learning phase, ask your customer support executive if any tools of education are available with your stockbroker. This is not a ‘must have’ for your stockbroker, however it can be an add-on.
Few other points to know before choosing your stockbroker:
Discounts and low-commission are not always good:
If you are new to the market and you will need a lot of help in the service while getting started. Although, its good to pay less, however, if you are getting premium facilities at a commission, it’s better for the beginners. Once you are experienced, you can carry out your investing/trading on your own. In addition, if you’re planning to invest in multiple investment options like mutual funds, bonds, IPOs, ETFs etc, then full-service brokers might be a better alternative.
Availability is important:
There are very few branches of discount brokers, whereas there are tons of branches of full-service brokers. If you can find a branch in your local, where you can easily go and personally meet the customer care executive to clear all your doubts, then its good to go.
Do not avoid customer services:
Investing/trading using online platforms are easy to use and have a number of resources available online. However, there may be few times when you will require technical support. It’s good to have someone to look for in such cases. Do not avoid customer services. Look for the reviews before opting for any stockbroker and if the customer service is poor, then search another broker.
Look for extras/add-ons:
Many stockbrokers provide extras like no ‘annual maintenance charge’ for the first year, free brokerage amount of Rs 500 etc. Check the add-on and added benefits. It’s always good to have some bonus.
Step 3: Apply to open your account
This is the last step to start your journey in the stock market.
Once you have selected your online broker (and ready with your documents), all you need to do is to apply to open your demat and trading account.
This is a very simple process. Either, you can fill out the application form online and upload the documents or you can choose an offline process. (In the offline process, you can download the application form, fill it out and send it to your broker along with the documents through courier.)
Moreover, you can always take help of the customer executives of your brokerage firm. They will help you out in the entire process (as this is their job). Just contact them through their website and they will take care of the complete procedure.