FY22 is expected to be a significant year for economic growth in India. Analytics have been projecting expected economic growth of 12.5%. Some rating agencies’ outlook is also on similar lines. In the eyes of industry experts, it is the time for significant growth in GDP as global growth is supportive, rates are supportive, and there is a shortage of various commodities that can increase its demand internationally; thus, increasing prices will support the Indian economy.
With a view to the current economic environment, investment portfolios continue to be overweight in pharma, infra, chemical, agrochemicals for the last year as these sectors turn the corner towards more positivity. Investors will remain rewarded in FY2021, just like FY2020, for taking risks in the stock market. Although volatility remained high, with markets scaling new peaks, the rate of redemptions in equities picked up. It indicates that traders were interested in booking profits given the higher valuations.
The availability of numerous trading platforms has made it easier for retail investors. Where most stockbrokers have waived off Demat account opening charges. They are investing in hi-tech trading platforms to facilitate traders. They are capable of meeting the increasing demand for online trading accounts of the tech-savvy generation.
Online Trading System
Today in the digital age, trades can make online trades conveniently and in less time using online trading platforms. SEBI registered stockbrokers facilitate online trading in every segment in the stock market. These are equity, debt, future & options, and commodities. In addition, online trading platforms facilitate several services. These are real-time stock quotes, secure real-time access to stock exchanges, reports on stock price analysis, and many other services.
Before 1996, when the Indian stock market functions were based on an open outcry system, traders had to be physically present in the stock exchange. They make a verbal bid for a share and execute a trade accordingly. It was a task of many days to transfer the ownership of the stocks.
With the development of technology, the online trading system/e-trading/self-directed investing has replaced the open outcry system in the digital era that requires online trading accounts and demat accounts provided by stockbrokers.
Trading Account
Like a demat account, a trading account is mandatory to sell or purchase financial securities in the stock market. It is an online account that facilitates transactions to make online trades to buy/sell securities in the stock market. Traders need not visit any stock exchange to execute a trade.
How trading platform works
- When a trader executes an order using the online trading account to take a market position, it is received by the stockbroker. The broker forwards the order to the stock exchange.
- The stock exchange finds a trader that wants to buy/sell securities in the same securities and the same number.
- Then both parties confirm the order for further processing and validate the trade by making a transaction with the clearing house.
- Once the transaction is completed, the order will be executed and the transaction will be reflected in your online trading account.
Formalities to open a trading account
You can open demat and trading accounts together using a single online form. There is the inclusion of a minimal fee to open a trading account. You need to submit the scanned copies of the following documents to the stockbroker:
- Your PAN card
- Residence Proof – Driving License, Aadhaar Card, Voter’s ID Card
- Income Proof
- A cancelled cheque
- Passport size photographs
- Signature
For income proof you can submit any one of these documents:
- Form-16
- Income Tax Return Acknowledgment
- Latest salary slip
- 6-month Bank statement
- OR Networth certificate from a CA.
General Charges to Run a Trading Account
To open and maintain a trading account, the following are the general charges levied by a stockbroker:
1. Trading Account Opening Charges
It is the one-time fee charged by a stockbroker to open a trading account. Depending on the stockbroker, it may vary.
2. Trading Account Maintenance Charges
- Trading account is one-point access for multiple exchanges to trade different financial securities.
- Stockbrokers with which you open an online trading account provide reliable information. This information helps in successful trading in the stock market as you can make informed decisions using research reports from experts.
- Online trading accounts enable you to make online transactions and trade seamlessly using advanced technology.
- It is a flexible online account that can be operated using smartphones, laptops, or tabs and from any corner of the globe.
For all these facilities, brokers charge account maintenance charges.
3. Brokerage Fee
Brokerage fee is the main cost associated with trading accounts. It is the fee charged by brokers to execute transactions. It can be a percentage of the transaction value of a trade or a flat brokerage fee. To save on the brokerage, traders opt for a discount broker and choose a flat rate brokerage plan.
Open a Trading Account at Minimum Cost
In the financial securities industry, a brokerage fee is charged to facilitate trading i.e. selling/purchasing of securities.
To save on the cost, you need to understand the types of broker and brokerage fee.
- Different plans can charge a standard percentage of the transaction, or flat fee, or a hybrid of both.
- And brokerage fees vary depending on the market segment you trade in and the type of broker you deal with.
- Brokerage fees are charged based on the plan you choose while opening a trading account.
The two main types of stockbrokers that charge brokerage fees are full-service brokers and discount brokers.
4. Full-Service Brokerage Fee
Full-service brokers assist their clients with several services. These are trading and investment advisory, portfolio management, tax consultation, and other financial services. Therefore they charge the largest brokerage fees, mostly based on a percentage of traded value.
5. Discount Brokerage Fee
Discount brokers are limited to services. They do not provide investment advisory services, but provide research reports. Therefore, they charge lower fees comparatively. Mostly they charge a flat fee for each trade and do not charge on delivery trades. Their trading account maintenance fee is also low.
Thus, besides convenient trades using online trading, lower cost of trades with research value addition has shifted towards individuals towards online trading. You can choose a discount broker to save on trading costs.
Also read:- How Many Accounts Are Required To Invest In Share Market?
