Points to Remember for Selection of Low Brokerage Stockbroker

by Pankhudi Dave Head Finance Manager

You often hear about one of the first steps for any stock market beginner being about opening a Demat and trading account. However, there is a very critical step even before you open the Demat account/trading account for stock trading. This step involves the selection of a stockbroking firm/share broker with whom you shall open both the accounts and get them interlinked. Many brokers highlight the natural process involved in opening these accounts, and it is effortless for you to get lured towards a broker who claims to offer this service for free or nominal costs.

However, you should not miss out on considering an essential criterion which is about the brokerage costs. You may want to opt for a low brokerage firm, but how do you measure the ‘low’ over here? In this article, let us understand in detail about brokerage, which enables you to shortlist the relevant stockbroking firms that provide the lowest brokerage charges in India.

Key Pointers for Better Understanding About Brokerage Charges

• For every stock trade that you execute from your online trading account, there is some amount charged on it in the form of brokerage. Now, while dealing with the overall brokerage, you need also to consider other fees applicable for annual maintenance or one-time account opening.

• Not everyone has the capacity or time to execute all trades by themselves. If you are one of them, you need to rely on your broking firm to provide you with the option for ‘call and trade’ where you simply inform the executive from the broking firm over the phone, and they would do the needful on your behalf. You need to ensure that the stockbroking firm is providing such a valuable service explicitly along with corresponding costs if any.

• Understand the difference between a discount broker and a full-service broker. A full-service broker will offer a wide range of online trading services along with research as well as advisory support. This kind of broker is ideal for you if you are not a technical expert in stock market investments. In case of a discount broker, services such as research and advisory are not offered as part of the initial package, but you may have to pay separately for these services. If you are an expert stock trader, you can go for a discount broker which will allow you to save a lot of money on large volumes of trades being carried out regularly.

• Do not get lured to a discount broker just because it claims to offer ‘no brokerage’ option/scheme (as most novices only focus on lowest brokerage charges). Such brokers generally make money from the float they obtain by not permitting you to take any trade position without initial funding (unlike the full-service brokers).

• You need to read the documentation carefully, along with related terms and conditions. Look out for any hidden costs that you may not have considered at the beginning. Search for those exceptional circumstances under which the broker will charge you. For example, some brokers would charge for making any funds transfer using a payment gateway. Similarly, certain discount brokers will charge you separately if you have not squared off your intraday trade before time, and because of which their trading system has to settle it off.

Final Word
You should not hurry to select the stockbroking firm with whom you can open your Demat account. Take your time and shortlist the better ones after considering various parameters and laying special emphasis on the brokerage charges. This is a one-time activity that will impact every trade that you execute from your Demat and trading account. So, it is vital to do a proper evaluation, and consider the pointers discussed here, before choosing your preferred low brokerage stockbroker.