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How to choose the right stockbroker?

Whenever we think about investing, the first thought comes how to invest or trade, is there any medium, who gives a platform to trade or invest.

If we talk about shares and stocks, there are 23 stock exchanges in India, and 2 are national level, NSE and BSE. We cannot buy any shares from exchanges directly, we need a Broker or Sub-broker. These Brokers are registered with SEBI, which is the regulatory body of securities and commodities market in India and owned by the Government of India. SEBI, Stock Exchanges, Brokers, Sub- brokers all are governed by SEBI Act, 1992.

There are two depositors of share/stocks, NSDL and CDSL. They convert over shares into electronic forms and keep them in our Demat Account.

For trading or investment, we need both a Trading account and a Demat Account, and to open these accounts, we need a Broker.

Earlier, Investors or Traders go to the office of the sub-broker or broker and execute their trade or by calling they execute their trade. Now, Internet and Smart Phone revolutionized the whole scenario. Now, every broker has a website or Mobile Application, from where we can execute a trade without the help of anyone and from anywhere.

There are mainly two types of broker – Full service broker and Discount broker.

Full-Service Broker also plays the role of a financial adviser. They do not only provide the platform to trade or invest but also provide retirement, financial planning. They charge for all their all services.

Discount Broker only provides the platform to trade or invest, they don’t give any advice or any research or planning to your trade, they only execute your trade. The charges are very low, which make difference.

The discount broker made investment and trading easier and reached all income groups. There are various discount brokers, and now they are leading in the market. Investors and traders are shifting towards Discount Broker.

But, when we have to choose any Discount Broker, we need to check some aspects.

Registration with SEBI

We first need to check, whether, any broker is registered with SEBI or not. We can check it by the official site of SEBI (https://www.sebi.gov.in).

Charges

There are three types of charges of any Discount Broker.

  • Account opening Fee
  • Annual Maintenance Charges
  • Brokerage
  • DP Charges

User Rating

Mobile Application and Trending platforms must be user-friendly and less complicated. User ratings from Google play store and Apple App store are helpful.  

Transparency

The most important aspect is transparency. We should check, whether, any Discount Broker charging more than their disclosed charges, whether there are any hidden charges, etc. Further, we also need to check transparency about the monthly statement of our buy, sell and brokerages.

Customer Support

Customer Support must be fast and responsive. They must listen to our all queries and give solutions for all our genuine problems.

Margin

If any traders want to intraday trading, he/she needs margin or leverages, it may be the multiple of your capital amount. If any broker gives you 10 x margins, it means that you may trade 10 times your capital amount.

Priority plan

All brokers have different priority plans for their customers; you may choose the broker, which priority plan suits you.

Power of Attorney

Power of Attorney is a legal document. We give power of attorney to our broker to handle our Demat account. We don’t need PoA to buy any shares, but we need PoA to sell our shares. When we go for selling our shares electronically, we need to authorize our broker to sell these shares on behalf of investors. PoA is needed only in the delivery of shares not in Intraday or Future and Options trading.

It is not mandatory to give PoA to the broker. Then the question arises that how can you sell your shares. To sell your shares you have to go with the offline process, first, need to fill Delivery Instruction Slips (DIS) and sent this slip to the broker, where you authorize your broker to debit your shares from your Demat account and transferred them to exchange.

If you don’t give PoA, the broker cannot debit your share from your Demat account. Long-term investors can open Demat and trading accounts without PoA. If any broker forces to sign PoA, you may complain to Exchange and SEBI. Nowadays, to sell shares online, there is e-DIS Transaction verification by CDSL, where we need Depository’s TPIN, which is provided by Depository CDSL. It means we can sell our shares hassle-free without submitting physical PoA.

Why we need to choose right Stock broker?

SEBI has banned Karvy Stockbroking firm for fraudulent activity. During the investigation of NSE, it was found that Karvy Stock Broking firm had transferred the share of their customers in their account. They pledged these shares to the bank and took a loan for their sister company Karvy Realty Ltd. It was a scam of Rs. 1100 crore between the periods April 2016 to October 2019. That’s why we need a trustworthy broker. If the company’s promoters are trustworthy, the company itself would be also trustworthy.

If we talk about the two most growing discount brokers in India, we find Upstox and Zerodha, where Zerodha has around 14 lacs traders, whereas Upstox has more than 6 lacs. If we talk about complaints against brokers, Zerodha has 0.03% and Upstox has 0.02% complain. Account opening fee in Upstox is zero, whereas Zerodha charges 200/-. Both have AMC around 300 rupees yearly. No Brokerage charges and only some taxes in delivery of shares in both. Upstox has various priority plans to offer to its customers.

If we talk about promoters Upstox has big name like Tiger Global and Ratan Tata.

I personally use both brokers and I found Upstox is better to handle and easy for new traders/ investors, whereas Zerodha is faster in opening in app and charts are really good.

If anyone wants to open an demat and trading account with Upstox, may use the link below:-

https://bv7np.app.goo.gl/7ESzVCfHTKySCssc9

If anyone wants to open an demat and trading account with Zerodha, may use the link below:-

https://zerodha.com/?c=RZ8386&s=CONSOLE

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