Whether you are a salaried or self-employed individual, you need to plan your finances judiciously. Apart from managing your monthly household expenses, there are bigger goals that might require additional savings. These include short-term goals such as buying a car, traveling to your dream destination, or purchasing a high-end smartphone.
However, to realize your long-term goals such as the education and marriage of your kids, buying a house and a comfortable retirement, simply saving your money in your bank savings account would not suffice. Your investment choices can play a huge role in wealth creation over the years, helping you achieve your desired milestones in life.
Equity markets have emerged as an attractive option to invest your money. However, they also come with an inherent risk. Therefore, before you decide to invest in the share market, you should have adequate knowledge about how to go about investing your money. To begin with, you need to open a Demat account for investing in tradable assets such as mutual funds, bonds, and exchange-traded funds. For this, you need to first understand what is a Demat account and how to open a Demat account online.
What is a Demat account?
As per the directive from the Securities and Exchange Board of India(SEBI), Demat account opening is mandatory if you are someone looking to invest in stocks, mutual funds, and bonds. Your online Demat account stores all your trading information and allows you to buy or transfer securities from the comfort of your home in a jiffy.
It helps you avoid the hassle of storing physical documents, which are often at risk of being misplaced or lost. Instead, physical share certificates are converted into a digital format or dematerialized, so that you can access them anywhere, anytime as per your convenience, while being assured of their safety and security. You can also benefit from live dashboards, charts, swift online payments, transaction statements e.t.c. to help you stay abreast of all the market-related information.
Demat account opening process
When you open a Demat account with the Stockholding Corporation of India (SCI), you have the option to either choose the Central Depository Services Limited (CDSL) or the National Securities Depository Limited (NSDL) as your depository. This double benefit account allows you to trade at low brokerage costs.
FastFwd, the one-stop portal of SCI allows you to log in and easily access a plethora of different products under one roof. These include government-run schemes such as National Pension Scheme (NPS) and Sovereign Gold Bonds (SGB) as well as Demat and broking, Mutual Funds (MF), GoldRush, and Bonds. It saves you the trouble of creating separate accounts and passwords for each investment. Instead, you can access all your investments under one umbrella and minimize fraudulent transactions as well as data breaches due to managing multiple accounts.
Steps to take before you open a Demat account online
Now that you know in detail what a Demat account is and how can you open a Demat account online, you must be eager to join the bandwagon. However, before you open a Demat account, you should sit back and analyze some key points, which if overlooked could lead to loss of capital. Here are a few things to consider that can help you make an informed decision:
1. Verification of the broker and financial aides:
Cross-check the information of your broker or financial advisor to make sure you can trust them with your money. Do your research about where to invest and engage in discussion with your financial advisor for a better understanding, However, be wary if he or she is aggressively selling you a particular asset. It is advisable to open a Demat account with a SEBI registered institution such as the SCI which has more than 30 years of experience. You can trust the advisors to offer you unbiased suggestions by thoroughly analyzing your financial history and future goals.
2. Study the convenience fee:
When you open a Demat account online, you are charged for its maintenance. This fee is usually minimal and varies from one broker to another. You should read the document carefully to understand the associated charges such as those for account opening, transaction, and custodian fee. SCI for instance does not charge any fee towards the annual maintenance of your account for the first year.
3. Protect yourself against online fraud:
With Cyber Crimes such as phishing and spoofing on the rise, online Demat account opening can be a risky proposition. Choose a financial partner with a secure payment gateway and robust electronic safety measures in place. Ensure that your details are verified before every transaction for added safety. Although there are checks and balances in place by SEBI, you should choose a broker with a secure ISO-certified information technology infrastructure when you open a Demat account online.
4. Enlist the help of an experienced advisor:
If you are a beginner to the world of investing in particular and wish to open a Demat account, you might not have the necessary knowledge to make prudent investment decisions. Seek out a certified financial advisor who can offer you an unbiased view of the investment choices available to you according to your risk-taking capacity, budget, life goals, and other parameters. A well-thought-out financial plan and strategy are crucial to wealth building over the years.
So, keep the above points in mind before you open a Demat account and choose the right trading platform that is trustworthy. Taking certain precautions can help you keep your financial goals on track and avoid the loss of your hard-earned money. A cautious approach together with added vigilance by monitoring your trading activity after the Demat account opening can protect you from online threats.
It is wise to start your journey in the world of investing with the thorough due diligence of your financial partners. Selecting one with years of experience in helping customers reach their financial goals, a foolproof electronic system with built-in fraud protection and experienced advisors to customize your financial strategy without any bias can give you an edge in equity markets.