a) Benefit of a single account: These accounts provide the flexibility to invest in a large number of financial instruments viz. equities, insurance, fixed deposits, government and corporate bonds, mutual funds, and Initial Public Offerings (IPOs). Additionally, trading in derivatives can also be done through this account. Therefore, trading account offers the convenience of investing in multiple products through a single platform.
b) Control lies in your hand: In the world of online trading, every second counts. A delay in buying or selling a stock could mean a loss of thousands or even lakhs. If you are using a dealer to do your buying, selling and trading, it could mean a significant delay, which in turn could prove to be costly. A trading account eliminates the need for an intermediary. You can take care of your investments on your own if you so wish.
c) Instant corporate action credits: Corporate actions like bonus, splits and dividend payments become a lot simpler in online trading. The bonus shares and the split shares are automatically credited to your account if your name appears on the record date. Even dividends are instantly credited to your bank account.
d) Cost effective: If you employ a dealer to execute your trades, he or she will take a percentage of the profits of those trades as a commission. The more money you make, the more will go to your dealer. However, if you perform online trades yourself, you will be able to keep all of your profits. What a dealer does sitting in the dealing room is directly done by the customer. While you’ll pay for online trades, the cost won’t be as high.
e) Customized to your needs: A trader using the online trading account can place orders with specific stop loss triggers and also go a step further with elaborate orders like bracket or spread trades. The trader can also place price alerts and volume spurt triggers onto specific stocks which may not be efficiently placed with the broker. It also makes it possible to track your strategies in real time and enables you to make immediate tweaks to the strategies and bring alertness in trading.
f) Allied benefits: Online portals not only provide the user with order placement but also offer an array of other information like market depth, volatility, historical price charts and real time news flow. You will have handy tools to model interest earned, yields, returns, etc., as well as financial screeners to research stocks and bonds. You can have access to good research tools and newsfeeds on each stock you want to choose, which you can delve deeper into in your own time. This enables the user to make a more informed decision.
g) Accessibility: You can access your online trading account from anywhere, anytime and on any device and keep a check on updates or alerts. With browser and application based trading platforms, trading accounts can be accessed through a computer, laptop, smartphones, tablets, and other smart devices. You need to devote time to your stock investments to be successful and an online trading account gives you the opportunity to make sure that you can always be in touch with your stocks and shares.
Now that we have understood its benefits, the next obvious question is – How to open a trading account?
The process to open a trading account is as follows:
Register with a broker: Stock brokers are of two types i.e. full service and discount. You can use a full service broker who will make investment recommendations based on your needs and desires, or you can use a discount or online broker that will execute your orders but will provide little or no advice. Discount brokers are less expensive, but provide fewer services. It is imperative that the broker is registered with the Securities & Exchange Board of India (SEBI). The other factors that you must look for are their reputation, service provided, security, brokerage fees, and consultancy services.
Compare brokerage rates: Every broker charges commission and certain fees for processing investors order. These charges can vary from broker to broker. Some give discounts on the basis of the amount of trades conducted. Take all this into account before opening an account.
Fill the account opening form: After you have selected a broker, you must fill the Account Opening form. This can be filled online or physically, which can be collected from the branch.
Complete KYC : Along with the Account Opening form, the Know Your Client (KYC) documents must also be submitted. If you already have a demat account with that broking company, then all this would not be necessary. You need to fill up these forms and submit it along with identity and address proofs.
Documents required for KYC: The following documents will be required for procedural formalities related to KYC:
Recent passport size photograph.
Proof of identity such as a copy of PAN card or UID (Aadhaar) or passport or voter ID or driving license.
Proof of address viz. passport, driving license, ration card, registered lease/sale agreement of residence, latest bank A/C statement, passbook, latest telephone bill (only landline), latest electricity bill, latest gas bill (not older than three months). Either of these documents are valid.
Verification & confirmation: After the submission of the Account Opening form along with the KYC documents, the account will be verified by the concerned authorities. Upon verification, you will receive your trading account details. The time taken to open a trading account depends on the processing time. On an average, it takes about a week’s time depending on the broker firm and the mode of registration.