5 Myths of Free Demat Account That You Should Stop Believing

Dreams of striking it big in the stock market, savvy investments that secure your financial future or achieving life goals, the demat account is the common denominator. One needs a demat account to start investing (except for traditional instruments like FDs) and most financial instruments are linked to a single account – The Demat Account

So, a Demat account is like the savings account of the bank except it’s for the stock market, and broadly, the financial sector. 

While searching for the right demat account; you might have come across this ‘Free Demat Account’ or ‘Free Demat Account Opening’.

How much of that is true? Is the demat really free? Let’s debunk the top 5 myths associated with a free demat account.

 

Myth 1 - Free Demat Account means no costs involved

Truth  Free Demat account or Free Demat account opening are essentially the same. This means the company has waived off the costs involved with opening a demat account, that’s all.  It does not mean that all the other costs like transaction costs, brokerage charges or AMC won’t be applicable.

Across the financial sector, Demat account opening fees range from  NIL to Rs.1000 maximum. Free Demat Account opening is like telecom companies offering a free sim card.

 

Myth 2 - Free Demat Account can only be offered by big companies

Truth - Not necessarily, in the above debunked myth, we gave the sector-wide range that companies may charge for opening the account, or offer it for free.  It is a business investment since trading and investing is what will generate brokerage, which will pay for the investment sooner than later.

Free Demat account can be offered by any broker and if the broker turns out to be dishonest, your portfolio will end up in the negative and you’ll still have to pay brokerage for it.

Selecting your broker after thorough research, brand reputation and reach, following the highest standards of corporate governance and transparency is of utmost importance. This is the tough part. If you select the right broker, things actually become easier and smoother.

Myth 3 - ‘Free’ means fewer services

 Truth - Not at all. Demat accounts are necessary for investing in stocks, mutual funds, ETFs etc. so quite a few brokers offer it for free, but it can’t be concluded that services will be fewer. Whether you plan to start investing with as little as Rs. 500 / month, the entire gamut of services will be available to you.  If you select a traditional broker, research advisory for trade / investment calls will be available.

 

Myth 4 - Free means not secure

Truth - While Demat Accounts can be opened with broker or banks, in reality your accounts are opened and operated by two Depository Participants which are,

CDSL: Central Depository Services Ltd

NSDL: National Securities Depository Limited

They come under direct supervision of market regulator, SEBI.

The security employed is state-of-the-art with constant upgrading and monitoring. No security lapse or threat is allowed, since millions of us invest via Demat, rest assured, Demat accounts are safe and virtually unhackable.

 

Myth 5 - Demat Account cannot be empty

Truth - There is no compulsion to hold some financial instruments or maintain any balance. Your Demat Account can be empty while being active.

So, there you have it. Select the right broker and start investing today!

 

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