There was a time when investing in stocks was considered beyond the pale of the common man. Day trading in particular was thought to be the preserve of financial wizards and mathematical geniuses. However, with the arrival of online trading in India and the convenience and security provided by demat accounts, access to the stock markets has been opened up for everyone. Even beginners can now start trading in the markets provided they first understand the basics of the stock market, follow the correct strategy and use the services of a suitable broker. Read on to find out which are the good brokers for beginners.
What is a Stock Broker?
The buying and selling of stocks occurs at a place called a stock exchange. In India, the two biggest stock exchanges are the NSE and the BSE. Given the large number of transactions that happen every day at different locations all over the country, stock exchanges use the services of intermediaries that enable the end-user to access the stock the exchange and buy or sell stocks. These intermediaries are called stock brokers. Since stockbrokers provide an essential service, they charge a fee for it known as brokerage. There are typically two kinds of stockbrokers:
Full-service brokers enable you to not just participate in the stock markets but also provide a host of other services such as analysis and portfolio management, trading advice, access to financial instruments such as mutual funds, ULIPs, etc. Full-service brokers usually have physical offices at different locations from where they operate.
Discount brokers emerged mostly after the arrival of online trading in India. Unlike full-service brokers, they only provide limited services and in return charge a very low brokerage. They also do not have a physical presence in most geographies that they operate in. Most online stock brokers are discount brokers.
Good Online Stock Brokers for Beginners
With growing financial literacy, an increasingly large number of Indians are taking to participate in the financial markets. This has led to the emergence of a robust ecosystem comprising a number of players in the online stockbroking space leaving the user spoilt for choices. Before zeroing in on the best broker for beginners, it is important to take stock of the factors that make a stockbroker competitive.
Brokerage is the fee that the broker charges for providing their services. This fee is typically charged each time a user buys or sells a share. However, in the case of online trading in India, many discount brokers offer zero brokerage accounts. This usually means that they do not charge any brokerage for equity delivery (the shares that you hold in your demat account and sell at a later date). They only charge brokerage on intraday trades (the shares that you buy and sell on the same date without taking delivery). Different brokers have different brokerage charges and one must compare them to arrive at the best online stock broker for beginners.
2. Account Maintenance Costs
Account Maintenance Charges or AMC are charged by your broker as a quarterly or annual fee for maintaining your demat account. In addition to the AMC, there is also a GST charged. Again, different brokers have different AMC charges.
3. The number of Active Clients
This is also an important metric to consider when zeroing in on the best online stock broker for beginners. Like for most other products and services, a larger user base indicates a greater level of user satisfaction and trust, and thus can be taken as a measure of better services provided by the broker.
With the above factors in mind, we can compare the best online brokers for beginners.
|Serial Number||Broker||AMC||Brokerage||Number of Active Clients|
|1||Zerodha||Rs. 300||– Free (for equity delivery)
– 0.03% of turnover, or Rs. 20, whichever is lower per executed order (for intra-day trades)
|3||5Paisa||Rs. 540||Rs. 20 per executed order||870,405|
|4||Groww||Rs. 0||Rs. 20 per executed order of .05% of turnover whichever is lower||780,570|
|5||Alice Blue||Rs. 400||Free||125, 223|
|6||Paytm Money||Free||Rs. 0 (minimum 0.01 per executed order)||85,827|
|7||SAMCO||Rs. 400||Rs. 20 per executed order||77,173|
|9||TradeSmart||Rs. 300||Rs. 15 per executed order||36,808|
With the presence of a large number of brokers, online trading in India offers a wide range of options to the consumer. A user must compare the various features and benefits offered by the different brokers before zeroing in on the best online broker for beginners. Besides the factors mentioned in the table above, users also need to take into account other important features such as the convenience and usability of the online trading platform offered by the brokers, the safety and reliability of their mobile app, the ease of opening a demat account with the broker, etc.