What is a Brokerage Account and how to open one?
Investing (or trading) is considered to be one of the smartest ways to grow your wealth. While knowledge and capital is essential, the biggest prerequisite to trading in the stock market is to open a brokerage account, also known as a Demat account. This is because, while investors can buy and sell their favourite stocks from stock exchanges, they cannot directly deal with depositories (NSDL and CDSL). So, it is mandatory to open a brokerage account in order to trade or invest online.
What is a Brokerage Account?
In simple terms, a brokerage account is an investment account opened by an investor in order to trade and invest. This account is opened with a registered broker and used to hold securities like stocks, preference shares, bonds, and ULIPs etc. Additionally, a brokerage account gives you access to a trading terminal, leveraged products including margin trading facility (MTF), and other value-added products provided by the broker.
What is the Use of a Brokerage Account?
A brokerage account allows you to conduct the following trades with ease:
- Equity and Derivatives TradingYou can buy and sell equity stocks, preference shares and even conduct derivatives trading (Futures and Options) with a brokerage account.
- Commodity TradingCommodity trading involves buying and selling of primary economic products like gold, oil, agricultural products, etc. Since commodity markets are negatively correlated with equity markets, commodity trading can act as a hedge against your equity portfolio.
- Currency TradingCurrency market is one of the most liquid markets in the world. With a brokerage account, you can leverage the power of currency markets.
- Mutual FundsA brokerage account provides you access to the entire mutual fund universe and also allows you to buy mutual fund units with ease.
- Sovereign Gold BondsInvestors can hold sovereign gold bonds in dematerialised form, which facilitates trading of SGBs and creates liquidity for the investor.
Benefits of a Brokerage Account
- Better Money ManagementInvestment through a brokerage account is organised and managed properly. You can access your trade history, capital gain statements, and profit & loss statements with ease, facilitating better money management.
- Superior ReturnsWith a discount or a zero brokerage account, you can save a lot of money on brokerage, thereby increasing your real returns from a trade.
- Various OptionsYou can trade across products (equity delivery, intraday, futures & options etc) with a brokerage account.
- Organised PlansA brokerage account lets you make both short-term and long-term financial plans. With intraday trade, you can meet short-term goals and through long-term investments like stocks/bonds, you can achieve your long-term goals.
- Higher Returnsinvesting in equities via a brokerage account can yield higher returns.
Types of Brokerage Accounts
There are three types of brokerage accounts:
- Full-service brokerage accounts
- Discount brokerage accounts
- Zero brokerage accounts
Let us understand the difference between the types of brokerage accounts with the following example: Say you bought 1,000 shares of Tata Consultancy Services Ltd. trading at ₹3,146 per share.
- Brokerage Payable Under Full-Service Brokerage AccountAssuming your broker charges you a flat fee of 0.05% on the total turnover value, the brokerage payable in the above example will be ₹1,573 (on a turnover of ₹31,46,000).
- Brokerage Payable Under Discount Brokerage AccountIn this case, suppose your broker charges you a flat fee of ₹20 per executed order. So, your brokerage payable becomes ₹20.
- Brokerage Payable Under Zero Brokerage AccountSince m.Stock charges zero brokerage across trades for life, the brokerage payable in this case is ₹0.
With such high savings, a zero brokerage account with m.Stock is the ideal brokerage account for investors.
How do I Open a Brokerage Account?
At m.Stock, you can open a brokerage account in less than 5 minutes, from the comfort of your home. Follow the below steps to open a brokerage account with m.Stock:
- Visit https://www.mstock.com/ and enter your mobile number
- Complete the account opening formalities and KYC process
- Upload the necessary documents, and e-sign the account opening form.
That’s it! Your m.Stock account will be opened in 24 hours and you can start trading. So, make the wise choice and open an m.Stock account today!
