If you wish to invest in stocks, mutual funds, or any securities, a Demat account is mandatory. Many investors, however, would not have the idea of what are the maintenance charges for such an account. These charges may not seem big but can actually affect the investment’s efficiency when they build up with time. Annual Maintenance Charges (AMC) and other fees must be understood in making a well-informed decision. So if you are thinking of cost optimization, below are seven practical and effective ways to manage Demat charges.
7 Tip to Reduce Demat Charges
1. Go For A Free Demat Account
There are many stock brokers offering Demat accounts without account opening charges and without annual maintenance charges for a specified time period. Some brokers provide free lifetime use of Demat accounts depending on their terms and conditions. It is advisable to compare the different brokerage houses before opening an account. Choose the broker with smooth trading available along with the Demat services at affordable rates.
2. Broker With Low AMC
Annual Maintenance Charges (AMC) Fees payable each year by a broker for keeping open a Demat account usually vary from INR 300 to INR 1,000. Choosing a broker who offers a lesser AMC should be sufficient, or if he promises zero AMC for the first year. Some brokers keep it limited for a year or two as a promotional benefit, so checking can also be beneficial.
3. Basic Services Demat Accounts Open (BSDA)
Investors can maintain a value of not more than ₹2 lakhs and can open a Basic Services Demat Account (BSDA). The AMC charges are lower compared to normal Demat accounts. When value holdings are below ₹50,000, there are usually no AMC charges. Typically, amounts from ₹50,000 to ₹2 lakhs attract very low AMC charges.
4. Consolidate All Your Demat Accounts
These accounts lead to incredible expenses as the AMC charges would then be applicable to each of the accounts. You could save all this and have the simplest portfolio management by keeping all your investments in one account.
5. Watch The Transaction And Custodian Expense
Apart from the annual maintenance charges (AMC), there are also transaction charges, custodian fees, and debit transaction charges, which the brokers levy. These charges are enforceable on buying and selling of shares. Therefore, for optimization, he needs to:
Select the broker who provides cost efficient brokerage plans.
Limit the excessive trading, for the more frequent transactions the cost incurrence becomes more.
Search for brokers who are offering zero brokerage on delivery trades.
6. Go for Discount Brokers
Generally, full-service broking houses have higher fees for opening a free Demat account. Discount brokers, on the other hand, tend to have lower brokerage and reduced AMC laws. There are discount brokers who would even give longer free of cost Demat accounts with zero AMC. Thus, for the investor who does not really require the advisory services, discount brokers might prove a cheaper alternative. 7. Either Keep Your Account Active or Cancel Inactive Accounts
Many people at some time or another have opened a Demat account but may find that they haven’t used it much. Such accounts, unless duly closed, would still attract AMC charges. If you don’t need a particular Demat account, then you could just as well go about closing it so that you do not incur any unnecessary cost. Just make sure that you transfer the existing holdings of the account to an active account before closing.
In Conclusion
Deft management of Demat charges can lead to some significant cost savings in investments. Few points in this regard can bring forth the economy-an investor should have a broker who charges low AMC fees, consolidate accounts, and choose a BSDA wherever applicable. Comparing brokerage services before opening an account will give an insight into transparency regarding such fees. Cost-effective trading and investment management have structured approaches.
