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!
