The first step towards online trading is through having a demat account. A demat account is basically a brokerage account opened with a Depository Participant (DP). It is a combination of a trading account and a bank account, and you can use it to buy, sell, or hold stocks. You can have a demat account with a full-service broker or a discount broker.
A discount broker is a stockbroker who provides essential trading services at a reduced commission rate.
Let us have a look at some benefits of having a demat account with a discount broker.
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This is the primary advantage of having a demat account with discount brokers—their commission fees are lower than full-service brokers. Since full-service brokers offer a wide variety of services, including advisory and research, it all translates into a high commission. It is more suited for an experienced and independent investor who does not require much investment advice or hand-holding to wade through the choppy waters of the stock market. He knows the game, and he just needs a trading platform to execute his transactions with minimal costs involved. Discount brokers, on the other hand, charge much less.
No Vested Interest
Since discount brokers do not give any investment tips or advice, the probability of the brokerages rigging the markets by influencing trades is non-existent.
Access to Information
Few discount brokers have websites and information portals, too, to help first-time investors.
Powerful Tools, Backed by Technology
Since discount brokers work on low margins, they bank on innovations. This helps them offer convenience to clients and also to reduce their overheads.
Why are Discount Brokers a Popular Choice?
- Information has been truly democratised by the internet and has empowered the user to convert information into knowledge. With this revolutionary power, the brokerage market is no longer the exclusive domain of big brokerages. Discount brokers are now able to provide the service at almost a fraction of their cost.
- With the rise of financial literacy, people have become more aware about financial planning and investments. Therefore, discount brokers can be a great choice for those who want to start with their online trading experience and are aware about the markets.
- The low-cost services make discount brokers more lucrative to financially aware investors.
- India being a nation of young people, technology is the ultimate deciding factor here in product purchases. Discount brokers, with their lean business model and hi-tech initiatives, automatically earn brownie points in this segment.
- Being tech-savvy and aware, Indians prefer a range of choices over advice. Therefore, discount brokers become a great option.
To wrap up, given the demographics of our nation, the popularity of discount brokers will only soar high from here on. Their business model works tremendously in their favour since it is what Gen-Z prefers too. You can compare the available options and select the best discount broker based on your investment and trading needs.