<div><em>Not just stocks, hold your investments in gold, mutual funds, IPOs in your demat account to reach your goals in a more cost-effective way, writes <strong>Sunil Dhawan</strong></em></div><div> </div><div>The number of demat accounts in the country is rising and had crossed 2.3 crore mark. If you think demat is only for investing stocks, there’s more to it. A demat account has its close cousin called the trading account, without which it’s merely a store for holding securities in digital form. So, there’s a trading account which get attached to the demat account. Through a trading account, one may invest in stocks, IPOs, mutual funds and even gold and hold them in demat account. </div><div> </div><div>There are two ways to go about it – Call up your banker else get in touch with a share broker. Both of them are known as depositary participant (DP) in demat parlance. They in turn have to be registered with either NSDL or CSDL. </div><div> </div><div>Ideally, open the demat account where demat, broking and savings account can be linked. This 3-in-1 account provides seamless transfer of funds and securities. Do not hold a demat account with one company and a trading account with another since it delays the settlement of shares and cash. Also, ensure if the transaction can be completed online through a website or will it be routed through software installed on your desktop. Website access can be had from any terminal and might just help. Get to know the additional formalities of you wish to trade through your mobile. </div><div> </div><div>KYC fulfilment could only be a part of the exercise, read all the agreement papers carefully. Discuss with the banker on important concerns related to investing, holding and selling of securities to get a fair amount of ide on how the process works.</div><div> </div><div>Cost is an important factor while opening demat account. There is a cost attached to opening and maintaining the demat account and also cost related to brokerage charges when you buy, sell securities. Even when there is no transaction, you end up paying annual fees. Therefore, be careful of costs. </div><div> </div><div>Brokerage cost varies as per volume transacted. So, check on costs of the DP accordingly. Many might waive joining fees and even maintenance fees for first year. Get to know from friends, colleagues about such accounts on the website's reliability, ease of fund transfer and transaction, and the customer service. The brokerage i.e. the cost that you pay to buy and sell securities is a recurring cost and can potentially draw down returns. The brokerage differs from company to company based on the volumes. To give an indicative figure, one may charge 0.75 per cent for a quarterly volume of less than Rs 10 lakh (Rs 1 million) and 0.25 per cent for an amount in excess of Rs 5 crore (Rs 50 million). Some online brokers insist on a minimum transaction volume for which they charge their lowest brokerage. </div><div> </div><div>The brokerage also varies depending on the type of the trade. While one may offer a low rate of 0.25 per cent on delivery, another may offer even lesser rate of 0.02 per cent on intra-day trading. Therefore select brokerage house based on your requirements, the kind of trade you would do and the amount of transactions. </div><div> </div><div>Not just stocks, one may invest in mutual funds too from the online broker’s trading platform and get the units transferred to the demat account. One may even start SIP in any of the mutual funds scheme. Also, buying gold is easier and less costly than acquiring it in physical form. Invest in Gold ETF’s from the same account. To give you an example, how cost-effective your demat/trading account can be, here’s a gold buying example. Today, on the 14th October, bank is charging Rs 2,900 for 1 gram of gold as against the gold price of Rs 2,700. Compared to them, gold ETF is available at Rs 2,400 through stock exchanges. More than 7 per cent savings right up front, it saves you from the burden of security, safety and purity. </div><div> </div>
