Is Opening a basic Services Demat Account a Good idea -Demat Accounts in India?

By | 24/09/2016

Most of the retail investors in India blindly jump into the stock markets without weighing the pros and cons of doing so. While investing in the stock markets is per se not bad blindly buying and selling of stocks without proper research or a sound understanding of them or the markets is akin to gambling. Many of the retail investors in India buy and sell shares on impulse and badly burn their fingers. Some brave individuals are known to indulge in futures trading where they lose their lifetime savings in a matter of weeks. They come to the conclusion that stock markets are the greatest evil on earth , which they are if investing is not done in a proper manner. Fear and panic selling lead to huge losses and can wipe away ones portfolio. Along with sound knowledge and research of the market a calm demeanour as well as nerves of steel is a must while investing in the stock market. For those who do not possess these attributes investing in a systematic investment plan of a mutual fund or even purchasing defensive shares such as pharma stocks which are known to hold their own even in a volatile market is a must. Above all this staying invested in the equity markets for the long term preferably a three year time horizon is a must. Besides all this excitement and loss of money there is a small expense which is neglected by retail investors in the stock markets. A popular saying a small hole can sink a large ship is conveniently neglected in all this excitement. One conveniently forgets the maintenance costs of the demat account .If ones investments in the stock market are a few thousands is it worthwhile paying an annual maintenance charge of INR 350-500 which could go as high as INR 700 on the demat account. For many retail investors in India the annual maintenance costs on the demat account can be as high as 2-3% of the invested amount. Is this expense ignorable?

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What is a basic services demat account commonly called a no frills demat account -Demat Account Information?

If one is a retail investor with a small holding in the stock market he lands up paying a huge amount for the annual maintenance of the demat account for services he may not use but has to pay for anyway. This might not be in ones best interests. In order to protect the interest of retail investors with small holdings the market regulator SEBI has asked all the depository participants to provide basic services demat account to encourage investments in the stock market.

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