Low Brokerage and Low-Cost Discount Brokerage

As part of an introduction into the world of holding and trading financial securities, one of the first things you’ll need to do is open a demat account, and understand the various charges associated with doing so, as well as the exact benefits received through the same.

What is a Demat Account?

Historically, investing in Financial Securities required physical effort, visits and documents. As a result, this investing opportunity came with lengthy procedures as well as a slew of problems like that of fake shares, scams and fake documents. In order to counter this inefficient functioning of the industry, and make use of technological advancements, the demat account was created.

A dematerialization, or Demat account, is an account that holds various financial securities such shares, equity or debt in electronic form. When you invest, all your physical security certificates such as bond certificates and share certificates and documents get converted into digital form and stored in your demat account to ensure ease of accessibility, increase reliability of security and improve tradability and thus, liquidity.

Demat accounts allow a number of facilities and options. It allows for seamless transfer of shares as it takes place digitally and there is no physical delay. They also allow you to avail of various loan facilities. A quick and efficient e facility as well as the option to carry out a number of corporation actions such as collect interests and dividends. These are some of the benefits of a demat account

In India, Demat accounts are controlled by two primary depository organisations: The Central Depository Service Limited and the National Securities Depository Limited.

Read More here: What is Demat Account?

What is a Brokerage Fee?

For most people, the process of buying and selling stock is done through the medium of a stock broker. As the term suggests, a stock broker buys and sells stock on behalf of clients. In exchange for their services, the stock broker charges a fee. This fee is known as brokerage.

While there are commonly accepted payment bands for brokerage fees, brokerage charges can vary from broker to broker, and based on the service they provide. Despite the primary service provided being buying and selling, stock brokers provide a plethora of other services, such as negotiations, consultations as well as deliveries (although the latter has reduced due to digitization), and these can be tied in with the benefit of a demat account.

Low Brokerage

As the term suggests, low brokerage services are offered by low-cost brokerage brokers. These brokers provide the basic facilities of buying and selling and collect a reduced commission in return when compared to full service brokers. However, due to this discounted rate of service, the services provided are basic in nature, most likely to be limited to buying and selling. It is extremely unlikely that they will include any premium services such as consultations and certainly not negotiations.

Low-Cost Discount Brokerage:

Before the onset of the technological age, brokers were a luxury only available to the wealthy. Since the advent of the internet, however, brokers are able to offer services to individuals with smaller investment amounts and caps, and more affordable rates. These individuals offering brokerage services to individuals with smaller market caps are known as discount brokers. Similar to low cost brokers, they offer skeletal services and cover the bare necessities of buying and selling stock for an individual.

Compared to traditional old age brokerage co-operations, low cost discount brokers provide you with similar services at a fraction of the cost. Additionally, the business model of a low cost discount brokerage firm is much simpler. They offer a flat rate of charge, with the amount being uninfluenced by the size of the trade. In simpler terms, they charge per trade.

Conclusion

Due to the onset of the digital age, stock trading and investing in stocks, bonds and securities is an activity becoming increasingly available to all socio-economic classes. Due to rapid digitization individuals can now create a demat account and carry out their investments without having to drop a hefty brokerage fee on a stock broker. Instead, due to the emergence of demat accounts and the ease of functioning they offer, individuals can now avail of low cost discount brokers to simply do their buying and selling. They can avail of the various other facilities such as negotiation and consultations for affordable rates elsewhere on the web. In the age of information, it is easy to adopt a do it yourself approach and garner the information online.

Open Demat Account at IIFL