The BSE Sensex has been somewhat of a roller coaster ride from 2008 to 2011. The market went from 22,000 points to 8,000 and is now inching back towards the higher side. A diligent investor could have made a fortune out of this. But the fact is that not many of us have the time or the expertise to be as diligent. This is why we should the services of a demat account provider who is willing to do the diligence for us. Their staff will have to work the same amount of time, regardless of whether they have one client or a million. Hence, their research doesn’t even add to the transaction costs.
Choosing your provider is, therefore, an important decision. Here are some criteria to use as a checklist.
Demat Account: What to Look for
Look at the Service Options
The fact that you need to be in control of your investments is so obvious that it shouldn’t need mentioning. However, not many traders realise that a lot of it depends on their demat account. It may be just a platform for buying and selling, but if it fails, your world comes to a standstill. First, look at the technology of your account provider. Inquire about how often it fails. Then ask whether they execute orders over the phone. The more options you have, the more you are in control. You may even want a provider who gives you mobile capabilities. This helps you transact from your account even on the move.
Look At the R&D Capabilities
A demat account provider is not a mere intermediary, facilitating buying and selling. They should advise you on your investments as well. As investors will tell you, it is only the quick advice from their trading partners that helped them minimise or completely avoid losses during the 2008 crash. A global research team only comes after sufficient scale. Hence, it is better to opt for the big providers, since they cater to many clients like you. Hiring professionals is much cheaper for them.
Check the Reputation
Ensure that your demat account provider does not use a tiered policy to disseminate information. Many providers will first give information to the high net worth clients and may not inform the retail investor at all. Hence, along with being big, you should ensure that retail clients are their focus. A step-brotherly treatment leaves you feeling sore as well as empty handed. When you enquire, ensure that you ask people who have portfolio sizes similar to yours for references.
To conclude, there are many factors that you need to consider while opening a demat account. A good way to do it is to open 3-4 small accounts with different providers, evaluate services for a month without telling them that you are doing so. Then decide on the basis of first hand factual information rather than on opinions.
