How to Open Trading Account Online – With increased financial literacy, an increasing number of people are investing in financial assets such as stocks and bonds. Investing in the capital markets also aids in portfolio diversification. Equities have historically provided good long-term returns. To invest in the equity markets, one must have a trading account, a demat account, and a bank account, in addition to proper financial knowledge.
What exactly is a trading account?
When you invest in the stock market, you are purchasing shares in exchange for money. Certified depositories hold the shares purchased by investors. These depositories offer investors unique demat accounts that securely store their stock holdings. When a shareholder sells a share, the share is removed from the demat account.
When the shares are held in the demat account and the funds are transferred from the bank account, what role does the trading account play? The trading account connects the demat account, the bank account, and the investor. The trading account facilitates the purchase and sale of shares. If you want to trade in equity shares, you must first open a trading account. If you subscribe to a public offering, you do not need a trading account because the shares are automatically transferred to the demat account if allotted. However, in order to sell or buy other shares, you will always need a trading account.
How do I open a trading account?
To open a trading account, you must first choose a broker. Brokers are classified into two types: discount and full-service. Basically. The classification is based on the type of accounts they offer. Discount brokers offer no-frills trading accounts that allow only the purchase and sale of shares without any value-added services. With the trading account, full-service brokers offer research, recommendations, financial data, and a variety of other services.
Once you’ve decided on the type of broker, consider its market credibility. Stock market fraud is not common in India, but it is not unheard of. Along with credibility, consider the proximity to the broker’s office and the trading software interface. The software interface is critical because a clumsy interface can be an annoyance while trading.
After you’ve decided on a broker, you can either go to their office and request a physical form or fill out an online form on their website. A representative from the brokerage firm will assist you with the application process and inform you of the documents required. Most brokers provide a demat-cumulative-trading account. You can only trade options and futures without a demat account, but you must have a trading account to trade equities.
Documentation is required.
To open a trading account, you must provide proof of address and proof of identity, as with most other services. A PAN card is required to open a trading account. You can provide proof of identity by submitting a passport, voting ID, driver’s license, or Aadhar card. Documents such as a telephone bill, an electricity bill, and a water bill can be used to verify the address.
For the manual KYC process, a photocopy of the PAN card, address proof, and identity proof must be submitted along with the original. Some brokers also conduct telephonic or manual verification.
The broker activates the trading account 3-4 days after the application and documents are accepted. There is an alternative method if you do not want to submit physical copies of the documents.
The E-KYC procedure
If you want to avoid manual KYC, you can use the Aadhar card to perform E-KYC. To use the E-KYC method, make sure your Aadhar card is linked to your PAN card and bank account. The mobile number associated with the Aadhar card must match the mobile number entered in the trading account application.
Aadhar verification is completed online using a one-time password. You must also upload a copy of your PAN card and a cancelled cheque. Following the submission of the documents, you will be required to verify yourself either through video conferencing or by visiting the broker’s nearest branch.
With the advent of the internet, opening a trading account and investing in the markets has become simple. Brokers have simplified the trading process, which has increased participation in the capital markets.