Revisiting 2008-09 Economic Crisis – Causes & Aftermath!

The Financial Crisis which occurred between the time period of 2008–2009 was a mammoth economic crisis encompassing worldwide. It was an enormous setback to the global financial system and had a series of aftermath. The crisis is contemplated as the grimmest financial crisis since the Great Depression of the 1930 s by many eminent economists around the world.

The fracture of the economic system-induced monetary damage on millions of Americans and gradually escalated to other economies. The reasons and causes behind the catastrophe are not solely driven by one factor, but it is a conflux of several prominent factors. Let’s look at it step by step what caused the financial crisis of 2008!

What caused the 2008-09 Economic Crisis?

— Sub Prime Mortage

Subprime Mortgage commenced in the year 2007 with a crunch in the Subprime Mortgage Market in the United States. Subprime Mortgages and the Subprime Meltdown are usually termed as the felons for the onslaught of The Great Recession.

A subprime mortgage is generally remitted to borrowers with low credit ratings because the lender perceives the borrower with high-risk appetite regarding defaulting on the loan. Lending organizations often put a burden of high-interest rates on subprime mortgages compared to prime mortgages due to the exposure to steep risk. Such mortgages didn’t require any down payment or, any proof of income.

Later, when the housing market took a crashing downturn, the borrowers found themselves in a precarious situation with their home values lesser than the value of their mortgage. Many of the borrowers lapsed because the associated interest rates were variable in nature according to the clause. Initially, the lending institutions provided loans with low-interest rates but they swelled over time and as a result, the borrowers were underwater. Due to ballooning up of interest rates upon the principle, it was difficult for the borrowers to pay down the principal amount. Many lending institutions were flexible in the provision of these loans due to high capital liquidity and a golden opportunity to make a lump sum profit.

Immense greed also led them to pool in the mortgages and sell off to the investors. The heightened increase of population who could all of a sudden purchase mortgages resulted in a situation of a housing shortage which led to a rise in housing prices. The soaring demand for the housing market made way for easy sanction of loans. When a large chunk of people started defaulting on their mortgages, the loan sharks lost all their lent money and so did many financial institutions that had invested extensively in the pack of mortgages. The subprime mortgage deadlock continued to exist and eventually transformed into a global recessionary situation as its repercussions beamed thoroughly in the financial markets and economies around the globe.

— Lehman Brothers

The highly talked about Financial crash of 2008 had elongated lineage but it wasn’t palpable until September 2008 when its flak became quite noticeable to the world. The news of the bankruptcy of Lehman Brothers is heavily claimed to be the torchbearer of the great economic crisis.

The filing of the bankruptcy was one of the grand incidents in the pages of history. Lehman was the fourth-largest. an investment bank in the USA with $639 billion in assets, $619 billion in debt and consisted of 25,000 employees all over the world. The investment bank is considered to be the largest victim of the Subprime Mortgage generated Financial Crisis that mopped away all the financial markets in the year 2008. The deflation of Lehman’s was an extremely crucial event that tremendously added fuel to the fire and eroded an approximate amount of $10 trillion in market capitalization from global markets.

However, in spite of its stamina to emerge victorious from previous disasters, the downfall of the U.S. Housing Market completely brought Lehman to a rock bottom. Lehman’s hovering amount of leverage and its extensive portfolio full of mortgage securities pushed it to extreme vulnerability under declining market conditions. Finally, on 15^th September 2008 Lehman Brothers, filed for bankruptcy. The further announcement of “No Bailouts” intensified the panic-stricken scenarios. Lehman’s paralysis agitated global financial markets for days, weeks, months and years.

Also read: The Collapse of Lehman Brothers: A Case Study

— Politics and Other Factors

Since the era of the 1980s, bankers and politicians have constructed a peevish partnership. Politicians had dramatically bribed banks into generating absurd loans to un-creditworthy borrowers on the pretext of the confirmation of bank mergers according to the Community Reinvestment Act. Politicians effectively advertised the expansion of the American idea of homeownership without calculating the possible risks and negative consequences.

Bankers were paid ludicrous amounts of money to securitize pernicious subprime mortgages. On the other hand, Rating Agencies swept in profits by labeling virulent securities as worthy of investment ie. “A” grade. The firms that followed the herd and gave into the riskiest hazardous types of subprime mortgages, securities, and derivatives were the first to backslide when the house of cards stumbled one after the other. CITIGROUP is the most prominent example of falling under this category!

AFTERMATH: 2008-09 Economic Crisis

— Crisis on Banking Sector

The financial crisis viciously slaughtered the banking sector where a large number of banks had to be bailed out by governments while others were mandated into unions with stronger heads. Institutions like Merrill Lynch, American International Group, Halifax Bank of Scotland, Royal Bank of Scotland, Fortis, Bradford & Bingley, Hypo Real Estate, and Alliance & Leicester were apprehended to pursue the road to bankruptcy but the announcement of a US Federal Bailout worth $85 Billion rescued them from absolute collapse. In spite of the “Bailouts” by the US Federal government, it became much more harrowing to take loans from the bank.

— Effect on the Equity Market

The 2008 crisis was a worldwide anomaly as it severely disturbed almost all the economies with a heightened degree of invasion. When the gigantic investment banks and eminent insurance companies were under immense pressure, they started selling equities to get some liquid cash for debt payments. The selling pressure induced a relentless crash in the equity markets around the globe. Since almost all Capital markets consist of foreign institutional investors, the impact was noticeable everywhere. The Asian markets in China, Hong Kong, Japan, and India were promptly affected and became parched after the U.S. Sub-Prime Crisis. Whenever there is a crucial correction in the markets in the USA it triggers all other markets as well because the rate of return in stocks is extremely correlated globally.

Also read: How Does The Stock Market Affect The Economy?

— Investor’s Catastrophe

The Bank Stocks went through a bloodbath where their respective dividends were ripped off and consequently led to the loss of wealth amongst investors. The majority of the population had much of their money parked in bank stocks because they were generating such high dividends.

— Declination in Consumer Wealth

The financial crisis caroused a critical role in the downfall of grass-root businesses and declination in consumer wealth. It also completely contributed to the European Sovereign-Debt Crisis which later manifested into a full-swing international issue and cornered the world’s banking system towards a deflation. Economies paced down during this phase as there was a decrease in international trade and the tightening of credits.

— Fall in Income & Opportunities

The Great Recession immediately fueled cutbacks in many reputed and non-reputed companies and there was a considerable fall in income. Great Recession restricted the opportunities for career enhancement and income raises. Financial flexibility was tremendously tampered by the Great Recession to a vast extent.

— Calamity in Economic Policies

The engineering of economic policies also altered thoroughly. Central Banks & Governments took on additional functions in regulating the financial system to managing monetary policy and also deployed new apparatuses like “Quantitative Easing” and ‘Austerity’. Quantitative Easing synthetically escalated the values of many fiscal assets, benefitting the existing wealthy section of the society. On the contrary, “Austerity Programmes” declined the aids and support available for the people belonging to the lowest rung of the income distribution. Austerity Programmes also led to the creation of high unemployment and curtailed public services.

Amidst the financial crisis, due to unfair structural reform, “Rich became richer” and “Poor became poorer.”

January 17, 2020 Oindrila Chowdhury Economics No comments yet

10 Common Mistakes While Investing in Mutual Funds

Mutual Fund investment is the talk of the town. These days, many people who earlier used to invest in the traditional saving schemes like PPF and FD are showing more interest in investing in Mutual Fund.

Ideally, if you don’t have a good knowledge of analyzing the security market, instead of directly investing in stocks, buying through Mutual Funds is a lot safer and more convenient. For the middle-class Indians, Mutual Fund investing is a wonderful way of fulfilling their desired goals. You can even start investing with as low as Rs 500 per month.

Irrespective of these advantages, there are many people- especially novice investors, who make a plethora of mistakes investing in Mutual Funds. In this post, we are going to discuss ten of the most common mistakes while investing in mutual funds.

10 Common mistakes while investing in mutual funds

Here are some of the general mistakes which you should avoid while investing in Mutual Funds:

1. Not defining any goal

You should clearly define your financial goals before you jump into Mutual Funds. One requires specifying his/her short and long term goals before deciding over the investment portfolio. If you are planning to go for a tour abroad after a year from now, investing in a Debt Fund seems more appropriate. On the other hand, if you wish to retire after 30 years from today, you should set up your SIPs in an Equity Fund to have a large corpus in hand during your retirement.

2. Not researching the fund properly before investing

Investing in the financial market makes no sense if you haven’t done proper research. Before investing in a Mutual Fund scheme, you need to know its fund type, exit load, historical returns, asset size, expense ratio, etc. You need to have a clear idea about your own risk-return profile before you invest your savings in some scheme. This article can provide you with the necessary guidance regarding making the selection of the right Mutual Fund.

3. Reacting to short term market fluctuations

There are many investors who get scared when the market witnesses a bearish trend. You need to understand that Mutual Fund investing is basically meant for generating long term wealth. So, you should not react to any sharp correction in the market or short term volatility. Moreover, you should refrain from blindly following the stock market analysts and business channels on television. If you don’t keep yourself away from the noise, your chances of making larger returns from Mutual Funds will decrease.

4. Not having a long-term mindset

People generally invest in the Equity Funds to make huge money. Equity Funds can only generate long term wealth if you stay invested for a substantially long period of time. Many people sell their funds losing their enthusiasm and patience after suffering from short term losses. This doesn’t make any sense if you are aiming for quick money from an Equity Fund scheme.

5. Waiting for the perfect time to start investing

I have recently talked to some friends, to whom I had explained about Mutual Fund investing a year back. I was taken aback knowing that he is yet to start investing. He still couldn’t commence investing because he has been looking for the perfect time to invest. I must tell you that when it comes to investing, you should never think of timing the market. Timing the market is important only when you look to trade, and not invest. The market goes through several ups and down in order to reach to point B from point A over a significant period of time.

6. Not having an emergency fund

Many investors invest their entire savings in the Mutual Funds at one go. Therefore, it goes without saying that they don’t have sufficient money for meeting emergencies like medical expenses. So, for paying such expenses, they have no option but redeeming their units and end up paying exit load. Exit load is one type of charge which is levied by a Mutual Fund company if you redeem any units within a specific period of time from the date of investment.

7. Inadequate investment amount

In the case of Mutual Fund investing, you should increase your SIPs in accordance with the growth in your income. Many investors don’t understand the importance of this. Therefore, their SIPs remain the same over time and fail to generate their desired wealth in the long run. Moreover, the inflation rate goes up with time. So, this is also a reason that one should step up his/her SIPs with time to achieve the desired corpus.

8. The dilemma of dividend funds

You will find many people opting for Dividend based Mutual Funds. This is to be noted that the dividends from a Mutual Fund are paid to the investors out of that fund’s AUM. This results in decreasing the NAV of the units of such Mutual Fund. Mutual Funds work best only if you stay invested for a significant term and let the power of compounding play its role. So, if you invest in a growth plan instead of a dividend plan, the amount which you are not going to receive as the dividend is reinvested in the market. This results in creating more wealth in the future as compared to the earlier plan.

9. Not diversifying your mutual fund portfolio enough

When an investor invests in too many schemes of a particular type, he/she thinks that diversification is achieved. You should understand that each Mutual Fund scheme is a portfolio of diversified securities in itself. Therefore, investing in multiple schemes of a specific nature results in nothing but portfolio overlapping at a higher expense ratio. Instead of opting for it, investing in 2 or 3 schemes to the maximum helps in achieving the benefit of diversification.

10. Not monitoring your fund’s performances periodically

Among the investors who invest in the market regularly, only a few them track their investments periodically. If you review the performance of your portfolio timely, it would keep you aligned with your financial goals. Lack of periodic evaluation of funds results in keeping your portfolio filled with junk investments which keep pulling your mean portfolio returns down.

Closing thoughts

AMFI came out with the campaign “Mutual Funds Sahi Hai” two years back. This four words campaign means that Mutual Funds are good in all respects. The main objective of this campaign was to create awareness among the Indians regarding Mutual Funds and bring more investors in the stock market.

However, it doesn’t mean that you can invest in any Mutual Fund scheme blindly. You must have heard this famous dialogue, “Mutual fund investments are subject to market risks. Please read all scheme related documents carefully before investing.” Mutual Fund investments don’t guarantee a fixed return. You need to go through all relevant documents and analyze the key aspects of a scheme, before investing in the same.

In this post, we tried to cover some major mistakes that plenty of investors make while investing in Mutual Funds. If you prevent yourself from committing these mistakes, we hope that you would become a better investor in the long run. Happy Investing!

January 16, 2020 Rajarshi Bose Invest Intelligently, Mutual Funds 3 comments

What are the Different Career Options in the Stock Market in India cover

What are the Different Career Options in Indian Stock Market?

The equity market has opened a lot of career opportunities in recent years. This market is getting bigger day by day and the opportunities for employment in the Stock Market are growing every day. People from all backgrounds whether science, commerce or humanities, are showing more and more interest to pursue their careers in Stock Market today.

On one hand, many people are opting to become a financial market participant and work independently. On the other, a significant number of Startups are establishing innovative ideas to create disruption in the Indian Securities Market.

In this post, we are going to discuss a few excellent share market career opportunities in India. Let’s get started.

Different Career Options in Indian Stock Market-

— Stock Broker

As you might already know, if you want to trade or invest in the Stock Market, you must open a trading and Demat Account. These two accounts are offered by stockbrokers. So, given the largely growing investing population of India, you can easily guess how prospective the career as a Stock Broker could be.

For example, If we take of Mr. Nithin Kamath, the founder of Zerodha (discount broker), he started off his career as an Engineer and subsequently started taking interest in the Stock Market. Later, he found the financial market so fascinating that he switched his profession as an engineer to a Stock Broker. In the year 2018, Zerodha, his stockbroking company was awarded the best discount broker entity in India by NSE.

Further, in order to become a Stock Broker or open a stockbroking entity, you don’t require a strict eligibility criterion in terms of academics. Nonetheless, you need to clear NISM exams and get your license from the SEBI. Anyways, if you plan to be a Stock Broker, it is important to gain a practical understanding of the Market. So, it is better to work with a Securities Broker for at least 5 years to gain requisite experience if you are willing to start your own venture.

Next, if you want to get employed in a Stock Broking Firm, you will need to clear 12^th standard at the minimum. Graduating in Accounting, Economics or Finance will help you start your career from a decent level. Qualifying Post Graduation is not necessary but it might help in fast promotion in the industry. In case you have qualified professional courses like CFA, CA or FRM, no doubt your career path would become really smooth.

(Note: You can read detailed information regarding making a career as a Stock Market Broker here.)

— Financial or Investment Advisor

If you want to start your own consultancy business in the Financial Market, becoming a Financial Advisor or an Investment Advisor is a perspective option.

In recent years, AMFI has been trying hard to bring the income earners in our country to invest in the Mutual Fund industry through their campaign “Mutual fund Sahi hai!”. However, just AMFI is not big enough to educate and convince billions of people in our nation to invest their money in the financial market. As an Investment Advisor, you can reach a plethora of prospective clients.

Preparing customized financial plans, providing consultancy services on wealth management and educating people on financial products can assuredly help you to build a career and make good money in this industry.

To become a Registered Investment Advisor, you will require an education and certification criterion. If you have a graduate degree in Finance/Commerce or at least 5 years of work experience with a financial company, you meet the educational criteria. Note that if you are an engineer with just a B.Tech degree, you do not meet the educational criteria by SEBI. Here, you need work experience in the finance field for at least 5 years or a post-graduate degree in finance.

Anyways, if you are a Post Graduate degree in finance, you won’t require any work experience to apply for your license from SEBI. Further, whether you are a Graduate or a Post Graduate, you mandatorily need to clear the NISM Investment Advisory Certification exam to apply for the SEBI registered Investment advisor. Once you meet all the educational and certification criteria, you can apply to SEBI and get your license. (Note: You can read this post to learn further on how to become an Investment advisor in India.)

Besides, completing CA, CFA or CFP will also help you get the required knowledge you need to render professional services to your clients.

Also read: What is SEBI? And What is its role in Financial Market?

— Research Analyst

Apart from becoming an investment advisor, Equity Research Analyst is also a lucrative career option nowadays. Let us have a brief understanding of this.

Equity Research includes Buy-Side Research and Sell-Side Research. In the case of the former, the researcher work with a financial service organization which directly invests people’s money in the Stock Market. Here, you need to research the stocks to help the Fund Managers make decisions with respect to managing the available financial assets. In the case of Sell-Side Research, the researchers analyze equities and equity derivatives for the clients who are retail traders and investors.

If you want to start your own business as an independent Research Analyst, the eligibility criteria are similar to Investment Advisory option. Further, if you want to take a job as a Research Analyst, the top financial service entities in India look for candidates who are MBA graduates from Tier 1 institutes. Nonetheless, you can also make a career as a Research Analyst if you have completed CFA or CA. (Note: You can read further regarding Equity Research Analyst profession here.)

— Portfolio Management Services (PMS)

If you are a Mutual Fund investor, you might know that your investments are managed by experienced and skilled Portfolio Managers. The Wealth Management firms operating in India handle clients’ money via professionally qualified Fund Managers. Portfolio Management could be an extremely rewarding career if you are good at managing money and have a strong understanding of the Financial Market.

In order to enter this field, you will require professional qualifications like CA, CFA or MBA (Finance). Moreover, if you are a fresher, it is extremely hard to get into this field. Here, you may need experience of at least a decade of working in the Finance domain as you need to grasp the level of maturity of handling assets which amount in crores. Therefore, if you are considering to become a Portfolio Manager, you may first start working in the marketing and research for 5 to 10 years. (Note: Here is a blog that can answer your additional questions on the career as a Portfolio Manager)

Conclusion

In this article, we tried to cover different career options in Indian stock market. Parting advice- if you are planning to make a living from the Stock Market, you need to have an in-depth understanding of the financial world.

Although possessing academics and professional qualifications are necessary but having practical exposure to how the market exactly works is more important. Besides, whichever stock market career option you choose, having strong communication and analytical skills are always add-on advantages.

January 14, 2020 Rajarshi Bose Investment Basics, News 7 comments

100 Minus Your Age Rule – The Easiest Asset Allocation Method!

100 minus your age rule: It’s always tricky to decide how much you should save and how much you should invest. Especially in riskier investment options like stocks or mutual funds. This is because the answer varies on different factors like the age, geography, or financial situation of the person. Moreover, the investing strategy of a 22-year-old need not be the same as that of a 60-year old. But, how much you should actually invest in different assets at the particular stage of your life?

There is no single correct answer to this question, and there can be multiple answers. However, it this post we are going to discuss one of the most popular allocation methods, known as the 100 minus your age rule.

What is 100 Minus Age Asset Allocation?

The 100 Minus Age Asset Allocation Rule is one of the earliest and elementary methods of Asset Allocation, which proffers a rational procedure to determine the distribution of equity and debt in the portfolio.

This rule is devised on the vital axiom of curtailing risks as we gradually turn old. It also interprets the Asset Allocation which is completely based on the stage of your life. Over time, various theories and models have been devised in an endeavor to lend advice about this crucial decision. The 100 Minus Age Asset Allocation Rule provides extensive assistance to decide the ratio of our investment in debt and equity.

The 100 Minus Age Asset Allocation Rule which states that we should take 100 as the minuend and our age as the subtrahend. The enumerated difference is the percentage of our network that we should be designating in stocks as of today, i.e. at our current age.

Examples of 100 Minus Age Asset Allocation Rule

At first, we will decode the definition by taking a person belonging to the younger age bracket.

AGE OF AN INDIVIDUAL: 22 YEARS

As per the definition, we will subtract it from 100.

(100-22) Years = 78 Years = 78/100*100= 78 %

Thus, according to the rule, he/she should keep 78% of his/her portfolio in equities. The rest of the portion should include high-grade bonds, government debt, fixed deposits, and other relatively safer assets. On the other hand, when he/she reaches the age of 80, he/she would diminish his/her allocation to stocks to just 20%.

Now, we will explain the definition by taking a person belonging to the older age bracket.

AGE OF AN INDIVIDUAL: 67 YEARS

As per the definition, we will subtract it from 100.

(100-67) Years = 33 Years = 33/100*100= 33 %

Thus, according to the rule, he/she should keep 33% of his/her portfolio in stocks or riskier investment options. The rest of the portion should include high-grade bonds, government debt, fixed deposits, and other relatively safer assets.

How does the 100 Minus Age Rule work?

The logic is simple. When you are old, you will have a lot more responsibilities and expenses compared to when you’re young. For example, if you’re at 58, you might be worried about the retirement fund, retirement home, higher education of your kids, the marriage of your daughter/son, etc. On the contrary, when you are young, you do not have much expenses or responsibility. That’s why it is considered wise to take more risks and invest in high risk, high return investment opportunities when you are young.

In professional vocabulary, this is attributed as a “Declining Equity Glide Path.” Every year or, at an interval of a few years, we would have to decline our share in equities which in turn will diminish the volatility and level of uncertainty of our investment portfolio.

As we get older, one of the most essential guidelines of investing is to eventually scale down our risk level since retired personnel get no scope for second chances in reference to the revival of the market after a sharp plunge. Therefore, this example depicts the simple perception behind the 100 Minus Age Asset Allocation Rule that strives to conclude that lesser the age, higher the risk-withstanding capacity & more the age, lesser the competency to combat the storm of the stock market and vice versa.

Drawbacks of the 100 Minus Age Rule

100 Minus Age Asset Allocation Method comprises of several loopholes. Let us analyze each of them in a detailed discussion.

1. Presumption of the fact that the process of financial planning is similar for everybody

The ultimate truth is that the procedure of financial planning varies from person to person where everyone has their exclusive preference and needs for Asset Allocation.

2. Inconsiderate about the basic factors for asset allocation

Asset Allocation requires a well-defined consideration of diversified factors like financial situation, preferences, risk-taking ability, time horizon, goals, and investors’ psychology.

However, the recognized path to asset allocation is to elaborate our risk profile at the very first stage. Assessing our risk profile will aid us to contemplate the approximate risk we are ready to undertake for the investment.

The second thing that needs to be taken into account is the time horizon for the purpose of investment. On the basis of the analyzed risk profile and time horizon, the decision regarding the asset class is executed!

For example, if you are an aggressive risk pursuer and have a long term time horizon for investment then you can allocate a major portion of your asset to equities. The percentage can be 80 % or, 90% to stocks and rest into debts. In exceptional cases, if you are someone having a supreme risk appetite, you can even invest 100 % of your assets. On the contrary, if you have a short time horizon in your mind, then it always recommended investing in a debt fund despite being an aggressive risk-taker.

3. Inconsiderate about the change in Life Expectancy

Over the past few decades, there has been an unwavering increment in life expectancy around the globe. The hike is driven mainly by improvements in medical facilities and infrastructure. However, as the majority of the people have started surviving longer than before, many financial advisors feel that there is a dire need for amendment in the rule.

According to experts, the modified figures should be closer to 110 minus the age or, 120 minus the age. There is another aspect that has been absolutely overlooked by the 100 Minus Age Asset Allocation Method. On average, women live nearly four to five years longer than men and thus, required corrections definitely need to be made in the rule to cater to the investment needs of women population.

4. Inconsistent results in reference to market fluctuations

Academicians and researchers had commenced a project to test the accuracy and performance of the 100 Minus Age Asset Allocation Method aka Declining Equity Glide Path in different market cycles. Intensive research reports display that in bear cycles or, during poor market conditions, this method has delivered distressing outcomes. In reference to the market happenings of 1966, if somebody retired during that year, they would have run out of money 30 years after retirement.

The same experiment was also applied to a bull cycle or, in strong market conditions. During the booming period, the 100 Minus Age Asset Allocation Method generated good results with the strongest ending account values. However, it is not possible to predict or foresee future market performances at the time of an individual’s retirement. Thus, it would be wise to chalk out a sound allocation method that sails through the crests and troughs of the stock market.

Conclusion

The 100 minus your age is a simple, yet effective way to easily allocate assets depending on the stage of your life. This age rule is based on the principle of minimizing risks as you grow old and hence, simplifies the asset allocation. However, this rule also has a lot of drawbacks and hence while deciding the asset allocation, you should keep in mind your priorities and financial situation.

Also read: How to Invest in Share Market? A Complete Beginner’s Guide

That’s all. I hope it post is useful to the readers. Happy Investing.

January 10, 2020 Oindrila Chowdhury Personal Finance, Save money 1 comment

6 Best Investment Options for NRIs in India

6 Best Investment Options for NRIs in India: Since the last two decades, India has been rapidly developing as an industrial hub. Day after day, our country is attracting more and more foreign direct investment (FDI). Moreover, these days we can see more and more investments coming from the NRIs to the Indian markets. And this is all happening because the Indian economy and government are offering adequate stability and flexibility to the investors. Not only India is conducive for business growth but our economy is also equipped with an extremely profitable financial market.

The year 2018 was not an immeasurable year for investing in the stocks as it witnessed significant bleeding throughout the year. Nonetheless, a similar situation was observed in any other country across the world. However, if you have a look at the year previous to that i.e. 2017, you would find that India’s stock market yielded around 29% return which was relatively higher than any other economy in the world.

Anyways, financial markets are subject to lots of ups and downs. It goes without saying that you need to undertake end-to-end research before you make your investment decision. Nevertheless, whatever investment option you opt for, it should always depend on your financial goals, liquidity requirement, risk appetite and expected returns.

In this post, we are going to discuss a few of the best investment options for NRIs in India which can provide them with adequate returns depending on their goals and needs.

6 Best Investment Options for NRIs in India.

Here are a few solid investment options in India where you can consider investing if you are an NRI.

— Fixed Deposit

Investing in Fixed Deposit is not only popular among the residents in India but also an attractive investment scheme for the NRIs. Being an NRI, you can open your FD with your NRE, NRO, or FCNR Account. All three of these are the types of bank accounts that an NRI can open in India.

Anyways, how much rate of interest will be applicable to your FD depends on the tenure of your deposit. In general, you can expect to earn interest between 6 to 7% on your account balance. Further, if you are a senior citizen, you would get the privilege of earning an extra interest of one percent. Moreover, this investment option is suitable for risk averse investors as FD is a comparatively safer form of investment.

Note: You can read more about the current Fixed Deposit rates in India here.

— Equity

In case you are an aggressive investor, you can consider investing in the equities listed in the Indian market. If you are an NRI, you can directly invest in the Indian stock market under the Portfolio Investment Scheme (PINS) of the RBI.

As an NRI, in order to invest in the stock market in India, you are required to have a bank account (NRE or NRO Account), a trading Account (with a SEBI registered Stock Broker), and a demat account. However, the maximum amount of your investment in the stocks of an Indian company cannot exceed 10% of its paid-up capital.

Further, this is to be noted that, as an NRI, you are not at all permitted to carry out intraday trading and short selling in India. This implies that you need to own the stocks before you can sell them.

— Mutual Fund

These days AMFI is working hard to promote Mutual Funds among the Indian population. Mutual Fund organizations pool money from their investors and then invest the same in the different financial assets. Mutual Funds have moderate risks as they are neither as risky as direct trading in stocks, nor they are as risk-candid as FDs. Further, mutual Fund investments can be highly profitable. There are a plethora of schemes available for Mutual Fund which can choose depending on your risk appetite and financial aspirations.

Anyways, if you are a person residing outside India, you would, unfortunately, face some limitations in mutual fund investing in India because of some rigid FATCA regulations. You are required to have an NRE or NRO Account for investing in the Indian Mutual Fund industry. Furthermore, you also have to invest in Indian rupees and not in any foreign currency.

Note: If you are new to mutual funds, check out our beginner’s resources for Mutual Fund Investing.

— Public Provident Fund (PPF)

A safer form of investment similar to FD is Public provident fund. PPF is an investment alternative which is backed by the Indian Government. Even if you are an NRI, you can invest in PPF. However, here the maximum limit is Rs 1.5 lakh in a financial year.

You can open your PPF account through a post office or through a branch of any nationalized bank in India. Although PPF comes with a lock-in period of 15 years it is definitely more tax efficient than FD. To know more about PPF, you can read this blog on our website.

— National Pension Scheme (NPS)

If you are looking for another tax-efficient investment option, you can even consider investing in NPS (National Pension Scheme). This is also cost-effective, easily accessible, and tax-efficient way to invest your money.

National Pension Scheme is an Indian Government sponsored pension system. If you invest in this instrument, your entire capital during maturity is treated as tax-free. Apart from that, you are not required to pay even a penny to the government as tax on the amount that you withdraw as pension. If you are an NRI aged between 18 and 60 years, you can open an NPS Account to start investing in this scheme. Click here to know more about NPS.

— Real Estate

It’s a fact that there are a lot of NRIs who stay abroad but look to buy their own house in India. Indian population is ever-growing and this is itself paving way for the advancement of Real Estate business in the nation. Being an NRI you can invest in a house property in India from where you can earn handsomely by letting it out to a third party.

However, this is to be noted that, you have to make any such purchases only in Indian rupee. Furthermore, you can’t buy agricultural lands, farmhouses, and plantations in India. Nonetheless, there is no restriction on you to inherit any such property or accepting them as gifts. Check out more on Real Estate investing in this article.

Closing thoughts

In this article, we tried to cover some of the best investment options for NRIs that they can consider if they are planning to invest their savings in India from abroad.

If you are a profit-loving investor and looking for a long term capital appreciation, you can choose to invest in the Indian stocks or mutual funds. In case you are having a huge corpus, high risk appetite, and high return expectation, you can invest in the real estate sector. Besides, you can invest in an FD if you have a short investment horizon and looking for a guaranteed return. Lastly, you can opt for investing in PPF or NPS if you are willing to earn tax efficient returns and at the same time not bothered to park your money for a longer period of time.

Overall, nn the basis of your priorities, budget and expected returns, you can make a choice of any investing scheme that suits you in the most effective manner. While making any investment in a financial instrument, ensure that you have gone through the relevant documents and understood the salient features of the same.

Our best wishes on your investment journey. Happy investing!

January 8, 2020 Rajarshi Bose Invest Intelligently, Investment Basics 1 comment

10 Questions to Ask Before Purchasing a Stock - Investment Checklist!

Picking a winning stock that can give consistent returns for many years requires a lot of analysis and research. However, you can simplify the research process if you have an investment checklist.

Having a reliable checklist for picking stocks can reduce the chances of missing an important detail that you should have studied before investing in the stock. As Charlie Munger, Vice-Chairman of Berkshire Hathaway has famously quoted:

“No wise pilot, no matter how great his talent and experience, fails to use a checklist.” — Charlie Munger

In this post, we are going to discuss ten key questions to ask before purchasing a stock by every stock investor. Let’s get started.

Quick Note: Although there are hundreds of points to check while picking a stock to invest, however, most of them can be categorized among the ten questions listed below. Anyways, by no means, I claim that this is the best checklist for picking stocks. My suggestion would be to study the investment checklist given below, improvise and make your own list of questions. Further, for simplicity, I’ve not included financial ratios.

10 Questions to ask before purchasing a stock.

Here are the ten key questions that every investor should ask before investing in a stock.

1. What does the company do?

What are the products/services that the company offers? Do you understand the company’s business model? How does the company actually make money? What are the top/best-selling products of the company?

2. Who runs the company?

Who are the promoters/owners of the company? It the company a family-owned or professionally managed one? Who is managing the company? What are the credentials/background of CEO, MD, Board of directors and the management team? What is the shareholding pattern of the company?

3. Is the company profitable?

How much profits did the company generated in the last few years? How are the company’s gross, operating and net profit and what is the profit margin at each level? Is the profit of the company growing over time or stagnant/declining?

4. Does the company have a sustainable competitive advantage?

Does the company have a moat like intangible assets, customer switching cost, network effect, cost advantages or any other sustainable competitive advantage that can keep the competitors away from eating their profits?

5. How was the past performance of the company?

How is the company’s financials in the past few years? What’s the trend in the company’s income statement and cash flow statement? How are the sales, EBITDA, Cash from operating activities, free cash flow and other financial metrics over the past few years?

6. How strong is the company’s balance sheet?

Are the assets of the company growing over time? How much is the liability of the company? Is the company’s shareholder equity increasing? How much cash does the company have on the asset side? How much is the company’s Intangible assets, Inventories, Receivables, Payables and more? Does the company invest in its Research & Development, especially in a few sectors like Technology, Pharmaceutical, etc?

7. Was the management involved in past fraud or scams?

Was the company’s promoters or management involved in any past scam? Does the company has any history of cheating the shareholders or any past penalty by SEBI?

8. Who are the key competitors?

Who are the direct and indirect competitors of the company? What is the market share of the company vs the competitors in the industry? What this company is doing differently compared to its competitors? Are there any global competitors or the possibility of global leaders entering the same market anytime soon?

9. How much debt the company has?

How much short-term and long-term debt the company has? Does the company generate enough profits or Free cash flow to cover the debt in the upcoming years? Have the promoters pledged any of their shares?

10. How is the stock valued?

What is the true intrinsic value of the company? Is the company currently over-valued, under-valued or decently valued? Is the company relatively undervalued compared to the competitors and industry? What is the calculated intrinsic value by different valuation method? How much is the margin of safety? Will you be overpaying if you buy the stock right now?

Also read: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

Closing Thoughts:

Although getting a recommendation or investing where friend/colleague suggested may land you into a few profitable deals. But if you want to make consistent returns from the market (and not just being lucky), you need to build your own trustable investing strategy.

It’s true that picking a winning stock required a tremendous amount of research. However, having an investment checklist of questions to ask before investing in stock significantly reduce the chances of investing in fundamentally weak stocks. Moreover, you can easily eliminate over 90% of the companies that don’t meet your checklist.

I hope the questions discussed in this post is helpful to you. If I missed any additional important to ask before purchasing stock in this investment checklist, feel free to mention below in the comment box.

That’s all. Have a great day and Happy Investing!

Kritesh Abhishek

Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting

www.linkedin.com/in/kriteshrules/

January 7, 2020 Kritesh Abhishek Investment Basics 3 comments

Corporate Social Responsibility (CSR) – What does it actually mean?

Corporate social responsibility, which is known as CSR, is a type of mechanical business model that can help a company to be socially accountable and responsible to all the stakeholders and the public related to the interests of the company. With the help of corporate social responsibility, a company can be socially accountable to the people, and it means that it owes something to them. It is a type of corporate citizenship that a company has over time.

First of all, CSR helps in image building formation.

With the help of the corporate social responsibility, a company can be conscious of the type of image that it creates to the society and impacts on the well-being of the people, directly and indirectly. There is a lot of impacts that the company can source out to the public. This can be done with the help of the economic, social, and environmental kind of ways.

If your company wants to engage in the work of corporate social responsibility, then they have to socially responsible for the well-being of the public whose interest lies in the company. It has to operate in such a way that it can be good and enhance the presence of the company, socially or culturally.

Corporate social responsibility in India

When it comes to India, then it is the leading source of business from all around the world. It is the first country that has made corporate social responsibility CSR mandatory, which the help of passing a law in the amendment in April 2014. With the help of these companies act passed onto by India, now businesses can directly invest their profit into the area of the society, they can help the community to have a better formation for the further source, and in the best way, CSR becomes a hunger for every company out there in the market.

Company’s Act passed for maintaining CSR by Indian Companies

According to the whole of the company’s act, which was passed onto by India, it was sourced that the net worth of any business will now be a part of the CSR here. To the net profit of about 5 crores made by any company, around 2% of the same target is to be spend around for the well-being and management of the society as a whole so that the community can profit from the revenue which is managed by these companies.

Before the same, India made it mandatory for the companies to disclose all their corporate social responsibility reports to the stakeholders and the shareholders of the company.

They should be liable and should be a part of the company’s profit-earning capacity as well. These were included for the projects related to the company’s activities and the projects that were related to the activities taken by the company on-board.

It was recommended all by the CSR committee as a whole to cover all the items listed in the source of the Companies Act, which was stated during the time of amendment.

Also read: What is Corporate Governance? Principles, Examples & More

What is the whole methodology of the CSR Technique?

With the help and including CSR for companies out there, it can help them to profit and earn them for the scope of the long run. It is the procedure of assessing all the impact of the organization on society and then slowly evaluating all their responsibilities. These responsibilities, which are managed by the group of organizations that uses CSR is to help the community become a better place by distributing the part of the revenue which is made and even sourcing out the following aspects which are presented below.

1. Channeling the needs of the customers

The customers are the central part of it. With the help of the customers, an organization can run smoothly. With the use of corporate social responsibility, a business can go in for the long drive of run with the source of the customer that they have. It can help them to the pan and rule out the odds.

2. Helping the suppliers to earn

Another one which comes on the second lot is the suppliers of the business. A business can only profit when the suppliers are pleased. These are done with the help of corporate social responsibility. When the part revenue is distributed, the suppliers can be happy and supply more for the business and include their service for a longer time.

3. Creating a proper work environment

The environment where the business is incorporating should be steady, as well. If the climate is not stable, then a company cannot lead its growth and go towards the best. This is why corporate social responsibility can help to enhance the working environment, inside and out of the organization.

4. Helping the communities

The communities are a huge part of society. These are the forums and groups through which the whole nation is based. If the business has to go for a longer duration, then they have to please the community members. This is done with the source of CSR and maintaining a cordial relationship with the communities of the society for a better outcome of results from altogether. The cities are the prime, and any organization should know it.

5. Providing comfort to the employees

The last one who lies here is the employees of the organization. If the working members of the organization are pleased, then only a business can run. Labor is what every organization needs out there and especially if they are skilled enough to do the job. CSR helps to have a proper relationship between the business and the labor.

Also read: Top 10 Companies in India by Market Capitalization

Legislation management for CSR

The most effective plan of corporate social responsibility for any business is to create legislation and to comply with it. Their investment for the source of the company should be a part of the whole society, and every decision that a company takes, the community should be a wholesome concern. The investments are a part of growth for any type of business out there, and only when the growth helps the community to lean towards the work of a company, the organization can have a more profitable revenue for the working years.

Organizations in India always thrives for corporate social responsibility

There are a lot of organizations located in India which thrives on the source of corporate social responsibility and have benefitted from the whole idea. They have to take special CSR initiatives altogether, which can help them to integrate the cause and to work on the entire business process on the run. With the upcoming years in the market, all these have become an endless source of income for the business as a whole, and it has helped them to gain revenue.

Besides growing your business, you should respect the culture and the beliefs of the people who are around you. With the help of respect, it creates a massive value of the business in the eyes of the public. It can help them to shape the business, which can be sourced out to a higher chance of collecting more revenue.

Businesses tend to profit more

With the help of CSR, an industry can source out their impending management and shape their responsibilities altogether. It can help them to understand the community at a large and also tend, adhere to the needs of the city. Companies do have a specific source and type of demand, which can help the department and the teamwork towards the development of particular purposes.

CSR management in Indian companies

CSR programs help the whole business to work for separate budgets and then support them in a wholesome way. It can improve the business to scope out the primary source of profit by looking after the well-being of society. When it comes to managing the source of work, then companies do have a specific source of the department which handles the work of corporate social responsibility. These are the departments that set up the policies of the CSR and then come up with freshly integrated ideas.

January 6, 2020 Meghashree Das Economics, News No comments yet

8 Best Discount Brokers in India - Stockbrokers List 2019 cover

8 Best Discount Brokers in India – Stockbrokers List 2020

8 Best Discount Brokers in India – Stockbrokers List 2020: With the rise of Zerodha, the discount broker which was founded in 2010, the Indian broking industry saw a massive disruption. As these discount brokers were offering a cheaper brokerage plan, they were able to attract a lot of customers compared to the expensive traditional brokers. After this disruption, many of the existing brokers and firms started copying the concept and offering similar cheaper plans.

After around a decade since these brokers started getting attention, discount brokers are becoming more and more popular in recent years. As a matter of fact, many of such discount brokers are able to outrank the well-determined and big ‘conventional’ trading firms. In this post, we are going to discuss eight of such best discount brokers in India.

Here, we’ll be evaluating the discount brokers in India based on the key features like their brokerage charges, account opening charges, maintenance charges, services offered, trading platforms, pros, cons and more. By the end of this article, you’ll have a better understanding of the different discount brokers in India so that you can choose the one that suits you the best. Let’s get started!

What exactly is a discount broker?

Discount brokers offer low brokerage, high speed and a fast platform for trading in stocks, commodities and currency derivatives. The brokerage charge while trading with these discount brokers are way lower compared to the traditional brokers in India like HDFC Securities, ICICI direct, SBI cap, etc.

Besides, the business model of a discount broker is quite straight forward. They offer a flat brokerage rate for every trade that their client makes, and it does not depend on the size of the trades. This rate can is usually between Rs 10 or 20 per trade.

On the other hand, full-service brokers charge a fraction of fee on the transaction volume. This commission can be as high as 0.3-0.7% of the transaction volume. Therefore, as the volume of the transaction increases, you have to pay more and more brokerage.

Now that you have a basic understanding of the discount vs full-service brokers in India, let us discuss eight of the best discount brokers in India which are worth investigating.

Best Discount Brokers in India

1. Zerodha

Zerodha, founded in 2010 by Nitin Kamath, is the biggest discount broker in India. It has over +1.5 million clients and contributes to over 15% of daily retail trading volumes across the Indian Stock Market. Its mobile app ‘KITE’ has got over +1,000,000 downloads on the play store.

Quick fact— According to the Dec 2018 report by NSE, Zerodha is the biggest stockbroking firm in India (client-wise), outranking many old and big broking corporates like ICICI direct, HDFC Securities, Sharekhan, etc. Through its innovation and practical approach, Zerodha has been able to outrank all these big players.

Zerodha brokerage charges

– Free equity delivery: All your equity delivery investments (NSE, BSE), absolutely free — ₹0 brokerage.

– ₹20 intraday equity and F&O trades: ₹20 or 0.01% (whichever is lower) per executed order on intraday trades across equity, currency, and commodity trades across NSE, BSE, and MCX.

Zerodha Demat And Trading account opening Charges:

For opening a trading and demat account at Zerodha, here are the charges:

— Equity Trading Account: ₹200

— Commodity Account:₹100

So, if you wish to open the Trading, Demat & Commodity account with Zerodha, the total account opening charges will be Rs 300. Further, the annual maintenance charge (AMC) for the demat account is Rs 300.

Services offered: Zerodha offers trading and investment services in equity, derivatives, currency, mutual funds & commodities.

Trading Platforms: Kite 3.0, Kite Mobile, Console, Pi, Sentinel, Coin

Pros of Zerodha:

Free Equity Delivery
Flat max brokerage per trade is Rs 20
Innovative & User-Friendly trading platform
Big brand value and customer support
Direct Mutual Fund Investment from same demat account

Cons of Zerodha:

No research report, market tips/recommendations

Quick Link to open an account with Zerodha

Note: You can read the detailed review on Zerodha here.

2. 5Paisa

5Paisa is a part of IIFL (India Infoline) and offers the cheapest stock brokerage in India. IIFL launched 5Paisa to offer a lower brokerage platform for its clients and to compete with the fast-growing discount broking industry.

Services offered: Apart from trading in equity, currency, commodity, 5Paisa also offers its services in mutual funds, Insurances, Personal loans.

5Paisa Brokerage charges

5Paisa offers free trading in equity and flat brokerage in other segments. Here are the brokerage charges offered by 5Paisa:

— Delivery Trading: Rs 20 per trade
— Intraday Trading: Rs 20 per trade
— Equity Futures: Rs 20 per trade
— Equity Options: Rs 20 per trade
— Currency Futures: Rs 20 per trade
— Currency Options: Rs 20 per trade

5Paisa Demat And Trading account opening Charges:

— Account opening charges: FREE (Rs 650 Waived)

— Annual Maintenance charges: Rs 45 per month (only for months when you trade)

Trading Platform: Investor terminal web platform, trader terminal, 5Paisa share trading mobile app

Pros of 5Paisa:

Free delivery trading
A low brokerage of flat Rs 10 per trade
100% paperless account investing
Investment in stocks, mutual funds & insurance from the same account
Lower maintenance charges
Research reports and advisory (for higher plans)

Cons of 5Paisa:

No 3-in-1 account
Higher exchange transaction charges
No commodity trading facility

Quick link to open your account with 5Paisa

3. Angel Broking

Incorporated in 1987, Angel broking is a big brand having +30 Years of experience in the broking world and +1 million happy customers. They have a presence in over 1800+ cities in India. Angel Broking offers the trading facility in Equity, F&O, Commodities, and currency across BSE, NSE, NCDEX & MCX.

Although Angel Broking worked as a full-service broker and offered a percentage brokerage charge to its clients for over two decades. However, they recently changed their business model (Nov 2019) from percentage brokerage to flat rates to compete with rapidly growing discount brokers like Zerodha, 5Paisa, Upstox, etc.

Angel Broking now offers a flat rate brokerage plan, named ‘Angel iTrade PRIME’. Here, the delivery trading is FREE of cost. And for all other segments i.e. Intraday, F&O, Currencies & Commodities, they charge a fixed rate of ₹20 per. The same simple rate is applicable across exchanges and segments.

One of the key advantages of trading with Angel Broking is that they provide guidance/recommendations for investing in the stock market along with research reports on companies and many other value-adding tools and services.

Services Offered: Angel Broking offers its services in Equity, Commodity, Currency, PMS, Life Insurance, ETFs, IPOs & Mutual Funds.

Angel Broking Brokerage Charge:

Delivery charges: Rs 0
Intraday Trading: Flat ₹20 Per Trade
Equity F&O: Flat ₹20 Per Trade
Currency F&O: Flat ₹20 Per Trade
Commodity F&O: Flat ₹20 Per Trade

Account Opening Charges with Angel Broking:

Account opening charge: Rs 0 (Currently Waived)
Annual Maintenance Charge: Rs 450 (Second year onwards)

Trading Platform: Angel iTrade, Angel Booking App

Pros of Angel Broking:

Cheapest full-service broker
Fast account opening process
Flat brokerage charges,
Up to 48x leverage,
Expert Research Reports & market advisory

Cons of Angel Broking:

No 3-in-1 account
Call & Trade are charged extra

Quick link to open your account with Angel Broking

4. Upstox

Upstox is a fast-growing discount broker, backed by a group of leading investors including Kalaari Capital, Ratan Tata, GVK Davix, etc. It is also known as RKSV. Upstox started as RKSV in 2012 and rebranded to Upstox in 2015.

Services offered: Upstox offers trading services in equity, currency, and commodity

Upstox Brokerage charges

Upstox offers two different brokerage plans (basic and pro plan). Delivery trading in free in both these plans. Here are the brokerage charges:

— Delivery: Rs 0

— Intraday Trading: Rs 20 per executed trade or 0.01 whichever lower (Basic Plan)

Upstox Demat And Trading account opening Charges:

— Account opening charges: Rs 300

— Annual Maintenance charges: Rs 150

Trading Platform: Upstox Pro Web Trading Platform, Bridge for AmiBroker, Developer Console, Option Chain Tool, Upstox MF Platform

Pros of Upstox:

Free delivery trading,
Fast paperless demat and trading account opening,
Margin against share is available,
Priority brokerage

Cons of Upstox:

3-in-1 Account not available
Cannot make direct trades in IPO & FPO, NCDs,
Margin Funding not available on delivery trades

Quick link to open your account with Upstox

5. Trade Smart

Trade smart is a Mumbai, India based discount broker good for traders and investors looking for low brokerages, high margins, and a fast trading platform. Unlike most discount brokers, Trade smart online is not a recent setup. It is a part +25 years old VNS Finance & Capital Limited, which is a traditional broker in India. It has over 50,000+ happy customers, averaging a daily turnover of over Rs. 5000 crores

Services offered: Trade smart online offers brokerage services in stock, futures & options, commodity, and currency trading segments.

Trade Smart Online Brokerage charges:

This discount broker offers a flat brokerage of Rs 15 per trade irrespective of the trading volume in its ‘Value’ trading plan.

Further, it also proposes a ‘Power’ trading plan with a brokerage of 0.007% on the transaction, which is suitable for the small volume traders. Here are the brokerage charges for delivery and intraday trading:

— Delivery: Rs 15 per trade (Power plan) or 0.07% (value plan)

— Intraday Trading: Rs 15 Per trade (Power plan) or 0.007% (Value Plan)

Trade Smart Online Demat And Trading account opening Charges:

— Account opening charges: Rs 400

— Annual Maintenance charges: Rs 300 (Second year onwards)

Right now, Trade Smart Online is offering a flat 100% off on the Account Opening Charges for the Trade Brains’ readers. You can open your FREE Trade Smart Online account by clicking this link.

Trading Platform: NEST Trader, SINE(Mobile App), SineWeb

Pros of Trade Smart Online:

Low and Unique Brokerage Plans,
Higher margin for trades,
Zero additional software charges,
Zero Demat AMC charge for the first year

Cons of Trade Smart Online:

3-in-1 not available,
No direct IPO Investment,
Call and trade at Rs 20 per executed trade (plus brokerage)

Quick link to open your FREE account with Trade Smart Online

6. SAMCO

Incorporated in 2015, SAMCO is another low brokerage cost discount broker in India. However, SAMCO differs from other discount brokers by offering higher leverage for trading to its clients. Here, customers can get up to 4x Delivery Leverage in the Cash Markets, Upto 80x Leverage for Nifty, 33x leverage for stocks and 60x for commodity.

SAMCO Brokerage charges:

Here are the brokerage charges offered by SAMCO:

— Delivery Trading: 0.20% or ₹20 per trade whichever is lower

— Intraday Trading: 0.02% or ₹20 per trade whichever is lower

SAMCO Demat And Trading account opening Charges:

— Account Opening Charges: Rs 0

— Annual maintenance charges: Rs 400 (Demat account)

Services offered: Samco offers trade facilities for stocks, F&Os, Commodities, and Currency in its dashboard.

Trading platform: SAMCO Trader (Omnesys NEST Trader), StockNote (Mobile Trading App), SAMCO Web Xpress (Website), SAMCO STAR

Pros of Samco:

FREE Trading and Demat Account opening,
Excellent margin products available for traders,
Flat max rate Brokerage Plan Rs 20 per trade
AADHAAR based instant paperless account opening.

Cons of Samco:

Online IPO, FPO Application not available
Mutual Fund investment is not available
Doesn’t have branches to offer local offline support

Quick link to open your account with SAMCO

7. Wisdom Capital

Incorporated in 2013, Wisdom Capital is an online discount brokerage firm providing services in stocks, futures, options on NSE and BSE and commodity trading on MCX & NCDEX. It also offers zero brokerage in its FREEDOM plan which attracts a lot of customers.

Wisdom Capital Brokerage charges:

Wisdom Capital offers three different brokerage plans to its customers: Freedom, Pro & Ultimate. Customers can choose whichever suits them the best. Here are the brokerage charges for each plans:

Freedom Plan:

Freedom plan offers ZERO brokerage in all segments
However, this plan does give a very little or no margin/exposure and hence might not be suitable for active traders.

Pro Plan:

The pro plan by Wisdom capital is designed for professional traders.
Suitable for the traders who need higher intraday exposures/margins
Delivery trading brokerage: 0.005% of the transaction
Intraday trading brokerage: 0.005% of the transaction
For rest, the brokerage is Rs 9 per trade (for NSE futures & options, currency & Commodity Trading at MCX).
Pro plan offers an intraday margin In NSE cash up to 40x MIS.

Ultimate Plan:

The ultimate plan is designed for high-frequency traders
Delivery trading brokerage: 0.007% of the transaction
Intraday trading brokerage: 0.007% of the transaction
For rest, the brokerage charged is Rs 15 per lot in options, 0.005% NSE futures, currency & Commodity Trading at MCX.
Ultimate plan by Wisdom capital offers intraday margin In NSE cash up to 60x MIS

Wisdom Capital Demat and Trading account opening charges:

— Account Opening Charges: FREE

— Annual maintenance charges: Lifetime 999+ Taxes

Services offered: Wisdom capital offer services in equities, future, and options, currency, and commodities on NSE, BSE, MCX & NCDEX

Trading platform: NEST Trader (trading terminal), BSE Bolt – a trading platform by BSE to trade across stocks listed on it.

Pros of Wisdom Capital:

Zero brokerage in FREEDOM Plan,
Flexible brokerage plans depending on client preference,
High exposure/margin in higher plans

Cons of Wisdom Capital:

No facility to invest in IPO, FPO, Mutual Funds, FDs, and NCDs
Not much focus on developing technology platforms
Average customer support

Quick link to open your account with Wisdom Capital.

8. Tradejini

Incorporated in 2012, Tradejini is a Bangalore based discount broker which offers a brokerage of 0.01% or ₹20 per executed order. It offers a single integrated platform for Equity, Derivatives, Commodities & Currency trading.

Tradejini Brokerage charges:

— Delivery Trading: 0.10% or ₹20 per trade whichever is lower

— Intraday Trading: 0.01% or ₹20 per trade whichever is lower

Tradejini Demat & Trading Account Opening Charges:

— Account Opening Charges: Rs 300 (Trading), Rs 300 (Commodity)

— Annual maintenance charges: Rs 300 (Demat AMC)

Services offered: Tradejini offers its services in equities, currencies, commodities and also ‘Mutual Funds’.

Trading platform: NEST Trading terminal, Web-based trader, Now mobile

Pros of Tradejini:

Low Brokerage Charges
Single trading platform for all transactions and segments,
In house CDSL depository participant

Cons of Tradejini:

Doesn’t offer 3-in-1 account,
No facility to invest in IPO, FPO, FDs, NCDs and Offer For Sale (OFS),
Only non-agriculture based commodity trading allowed
Does not allow GTC orders

Quick link to open your account with Tradejini

9. Fyers (Bonus)

Incorporated in 2015, Fyers is Bangalore based fast-evolving online discount stock broker founded by young entrepreneurs with broad experience in trading and the stockbroking industry. Apparently, FYERS word is an acronym of “Focus Your Energy & Reform the Self”, which represents the core philosophy of the company.

Services offered: Fyers offer services in equity Cash, F&O and Currency Derivatives segments at NSE.

Fyers Brokerage charges:

— Delivery Trading: Rs 0

— Intraday Trading: Flat brokerage fee of maximum ₹20 per executed order.

Fyers demat and trading account opening charges:

— Account Opening Charges: Rs 0

— Annual maintenance charges: Rs 0 (Demat AMC Waived)

Trading tools: Fyers One (Trading Terminal), Fyers Markets (Mobile Trading App), Fyers Web Trader, Thematic investments

Pros of Fyers:

Free online account opening
Free delivery trading and low brokerage
Advanced charts, real-time screeners and analytics
Thematic investment platforms for investing in the latest themes
Moderately high exposures- Offers up to 16 times margin in equity intraday segment

Cons of Fyers:

Higher demat account maintenance charges
Slightly higher exchange transactions compared to other discount brokers

Quick link to Open Account with Fyers

Closing Thoughts: Discount brokers in India

While choosing a stockbroker, look for the broker which offers a reasonable brokerage charge, low yearly maintenance cost, high-quality trading tools, active customer service, and no hidden account fees. Besides, put your priority and personal trading style in preference of the brokerage firm before opening your account.

These days, the discount brokers often start a new campaign every month to attract new customers by offering Zero account opening charges, referral clients benefits or even brokerage cashback. The competition among the brokers is challenging them to innovate faster, give more customer support and hence traders/investors are able to enjoy better trading facilities and services.

Need more guidance to help you pick the right online stockbroker. Here are the best resources to read further:

January 5, 2020 Team Trade Brains Online Brokers 1 comment

Zerodha Review –Discount Broker in India | Brokerage, Trading Platform & More

Zerodha Review 2020 – Is Free Investing Legit? [Pros and Cons]

Zerodha Review– Brokerage, Trading Platform, Account Opening Charges, Pros, Cons & More

Zerodha is the biggest discount broker in India and perfect for traders & investors looking for low brokerage, easy interface, and reliable trading platform. It offers a zero brokerage for delivery equity & direct mutual fund investments.

For all intraday, Futures & Options, currency, and commodity trades across NSE, BSE, MCX, it offers a brokerage of Flat ₹20 irrespective of the trading volume. It doesn’t matter whether you trade for Rs 1 lakh or 1 crore, you have to pay a flat low brokerage of Rs 20 per trade. Therefore, you can save a lot of brokerage charges on your trades using Zerodha as your broker.

In this Zerodha review, we will discuss the brokerage charges, account opening charges, maintenance charges, trading platforms, products, my personal experience of using Zerodha & more. By the end of this post, you’ll have a complete understanding of Zerodha trading services and whether this broker is right for you or not. Let’s get started.

Zerodha Review –Brokerage, Charges, Trading Platforms & More

1. Introduction

There are two types of stockbrokers in India. Full-Service brokers and Discount brokers. The full-service brokers offer a trading platform along with advisory. However, their brokerage charges are high. A few major full-service brokers in India are HDFC Securities, ICICI Direct, Motilal Oswal, etc.

On the other hand, discount brokers offer trading platforms with minimum brokerage charges. Nonetheless, they do not provide advisory services. The biggest advantage of a discount broker is that it saves a lot of brokerages for the traders/investors. On all other prospects, like performance, computerized trading systems etc- both offer similar facilities.

An important point to know here is that all the brokers- Full service or discount brokers are licensed and regulated in India by regulating bodies like SEBI.

Zerodha is a leading discount broker in India in terms of daily trading volume, growth and customer base. It is one of the most technologically advanced and cheap stockbrokers. Zerodha has over +1 million clients and contributes to over 10% of daily retail trading volumes across NSE, BSE, MCX.

Ironically, the term ‘Zerodha’ is derived from the fusion of an English and Sanskrit word. ‘Zero’+’Rodha’ where ‘Rodha’ means barrier. Overall, Zerodha means ‘Zero Barrier’.

It was started by Nitin Kamath, an Engineer by qualification, in 2010. Nithin bootstrapped and founded Zerodha in 2010 to overcome the hurdles he faced during his decade long stint as a trader. He was named one of the “Top 10 Businessmen to Watch Out for in 2016 in India” by The Economic Times for pioneering and scaling discount broking in India. Here are a few of the famous awards won by Zerodha recently:

— National Stock Exchange (NSE) “Retail brokerage of the year 2019” (& 2018)

— Outlook Money “Retail broker of the year 2017”

— Ernst & Young “Entrepreneur of the year (Startup) 2017”

2. Zerodha Brokerage Charges

Zerodha offers trading services to buy and sell stocks, futures & options in equities, commodities, and currency segment. Here are the Zerodha brokerage charges:

– Free equity delivery

All your equity delivery investments (NSE, BSE), absolutely free — ₹0 brokerage.

– ₹20 intraday equity and F&O trades

₹20 or 0.01% (whichever is lower) per executed order on intraday trades across equity, currency, and commodity trades across NSE, BSE, and MCX.

Type	Brokerage Charges
Equity Delivery	Rs. 0 (FREE)
Equity Intraday	Lower of Rs. 20 per executed order or 0.01%
Equity Futures	Lower of Rs. 20 per executed order or 0.01%
Equity Options	Lower of Rs. 20 per executed order or 0.01%
Currency F&O	Lower of Rs. 20 per executed order or 0.01%
Commodity	Lower of Rs. 20 per executed order or 0.01%

Quick note:

1. You can use this Zerodha Brokerage Calculator to get more ideas.

(Zerodha Brokerage Calculator)

2. Apart from brokerages, there are also a few other charges that you have to mandatorily pay on your transactions like Exchange transaction charge, STT, SEBI turnover charges, GST, etc.

You have to pay these charges no matter which stockbroker you prefer to trade in stocks and that too on both sides of transactions i.e. while buying and selling. However, the brokerage cost can be controlled by choosing a discount broker. For example, in the case of Zerodha, you can notice the total brokerage of Rs 40 for both sides of Intraday equity trading, even though the total turnover is Rs 8.4 Lakhs.

You can have read this blog post to understand the different charges while trading in stocks.

3. Zerodha Account Opening Charges & AMC

Here are the account opening charges for Zerodha

Equity Trading Account: ₹200
Commodity Account:₹100

If you want to trade in both equity and commodity, then you need to pay an account opening charge of Rs 200+Rs 100 = Rs 300. Anyways, if you are just interested in trading in stocks i.e. equities, you can open demat and trading for equity account at Rs 200. The demat account annual maintenance (AMC) charge is Rs 300 per year.

4. Zerodha Products & Features

Zerodha has built its own trading applications for the customers. It offers different trading terminals, websites, and mobile apps (Android/iOS) which are free for the customers.

— Kite 3.0

Kite 3.0 is a modern technology-based trading platform with streaming market data, advanced charts, an elegant UI, and more. It is a minimalistic, intuitive, responsive, light, yet powerful web and mobile trading application offered by Zerodha. Kite provides Bandwidth consumption of fewer than 0.5 Kbps for a full market watch, extensive charting with over 100 indicators and 6 chart types, advanced order types like Brackets and cover, millisecond order placements, and more.

Overall, Kite provides an excellent experience to the users through its groundbreaking innovations presented with hassle-free usability.

— Kite mobile

This is a mobile version of KITE for a seamless experience for mobile-users and available in both Android and iOS devices.

— Coin

Zerodha Coin is a platform that lets you buy mutual funds online directly from asset management companies. This platform is absolutely free since August 24, 2018. Here, you can make your investments without any commissions.

With the help of Zerodha Coin, you can have Direct mutual funds in DEMAT form, with the convenience of one portfolio across equity, MF, currency, etc. Moreover, it also provides a Single capital gain statement, P&L visualizations, and more. This Coin by Zerodha has made investments through SIPs really simple and flexible.

Other Partner Products

Apart from the above products, Zerodha also offers a few other partner programs:

Smallcase: This thematic investment platform is powered by Kite Connect APIs. Smallcase helps users to invest in different themes by intelligently providing weighted baskets of stocks in each theme.
Sensibull: This is an options trading platform which offers simplified options trading for new investors by providing powerful trading tools. Sensibull aims to make options trading safe, accessible, and most importantly, profitable for all.

Besides, Zerodha has also started a few educational initiatives to improve financial literacy and increase the participation of the common people in the financial world. Here are a few other products offered by Zerodha

Zerodha Varsity: An educational platform to educate people about investing and trading. Zerodha Varsity offers free modules on Technical analysis, fundamental analysis, futures, options, risk management, trading psychology & more. Recently, Zerodha Varsity also launched its Varsity mobile app.
Trading Q&A: An online forum powered by Zerodha to answer people’s most troublesome investing and trading questions.

5. Pros and cons of Zerodha Discount broker

Here are a few advantages and disadvantages of using Zerodha trading platforms:

Pros of Opening Account with Zerodha

Zero Brokerage Charges for Delivery
Flat Charge for Intraday (Rs 20 or 0.01% whichever is lower per executed order for everything else)
Same pricing for across all exchanges
No upfront fee or turnover commitment
Z-Connect, interactive blog, and portal for all your queries
Trading, charting, and analysis, all rolled into one next-generation desktop platform Pi.
Minimalistic, intuitive, responsive web-based trading platform Kite
No minimum balance required to open Zerodha trading account
Invest in direct mutual funds with same demat account through coin

Cons of Opening Account with Zerodha

No advisory services or research report.
3-in-1 account (Saving+Demat+Trading) not available.
Online IPO investment not available. (Now, Zerodha customers can invest in IPO’s through UPI payment. Read more about Zerodha IPO applying process here)

Note: Zerodha has recently started offering Zerodha IDFC FIRST Bank 3-in-1 account. However, to open a 3in1 account at Zerodha, you need to have an existing account with IDFC FIRST Bank. Accounts can only be opened online. Read more here.

6. Is Zerodha a Reliable Stockbroker? And is Free investing legit?

Is Zerodha safe for long-term investments? This is one of the biggest questions that come in the mind of first-time investors. Obviously, HDFC Securities, ICICI Direct, SBI cap, Kotak securities, etc are big brands in the name of the broking industry and been in the market for decades. Hence, they have built greater trust compared to Zerodha, especially for the ones who have never heard its name before.

Anyways, Zerodha, the discount broker, originated only in 2010. Therefore, if you’re not involved in the share market investments/tradings in the last decade, it’s no surprise to say that you might have not known this broker. However, in the short span of around 10 years, this broker has been able to beat all the big traditional brokers. Currently, Zerodha is the biggest stockbroker in India, based on the number of clients (over 15 lakh users), followed by ICICI Direct and HDFC securities ranking second and third.

Now, answering your question, Yes, Zerodha is safe and reliable. In fact, since origin, Zerodha has never faced any case of major violations from SEBI or any of the other exchanges. It is a profitable private company with no debts or liabilities.

Moreover, Zerodha is partnered with Central Depository Services Limited. CDSL’s main function is the holding securities either in certificated or uncertificated form, to enable the book-entry transfer of securities. Therefore, when it comes to the security of the shares in your demat account with Zerodha, you do not need to worry at all. The stockbrokers are just the agents of depositories.

Your stocks are actually held by central depositories and not by the depository participants (brokers). Therefore, even if something didn’t work out well with Zerodha, your stocks in the demat account are safely intact with CDSL. In short, Zerodha is completely legit and reliable for your trading or long-term investments in the Share market.

7. My experience of using Zerodha

It’s been over three years since I’m using Zerodha and I’m satisfied with the trading services provided by Zerodha.

Initially, I started with ICICI direct as my broker, but later I switched to Zerodha when I realized that I was paying way too much brokerages for my trading transactions.

Most beginners do not consider the brokerage charges while calculating the profits. I use to make the same mistake. And that’s why many times the final profits in my bank account (after deducting the brokerage and other charges) disappointed me as it was considerably lower than what I calculated in my head. I wish I had switched to a discount broker earlier as it could have saved me a lot of ‘unnecessary’ brokerages and moreover trading experience is even better on Zerodah. Nonetheless, I use Zerodha for making all my stock investments now.

Besides, there was one ‘cons’ of using Zerodha as a broker which bugged me in the past. And it was not having the facility for the customers to directly invest in Initial public offerings (IPOs) through the Zerodha dashboard. But this issue is also solved by Zerodha. Investors can now apply for IPOs directly within the Zerodha console. And the best part is that the process is really simple.

Finally, a lot of people complain that Zerodha doesn’t provide advisory services or buy/sell calls. I believe that one should never invest or trade based on the broker’s recommendation. There’s a conflict of interest here as the brokers will always make money when you trade and doesn’t matter whether you win or lose. Therefore, they might always motivate investors to trade frequently. Overall, Zerodha not giving advisory services doesn’t bother me. Moreover, they make us for these cons by providing educational initiates like Varsity.

8. How to open your trading & demat account with Zerodha?

Opening a demat and trading account with Zerodha is really fast and hassle-free. In fact, if you’ve all the documents, you can open your account and start trading within an hour.

Here are the documents required to open a demat and trading account at Zerodha: PAN CARD, Aadhar Card, 2 Passport size photos, Canceled cheque/ Saving bank account passbook. I will recommend keeping photocopies of all these documents ready before you apply for opening the accounts.

To open your trading & demat account at Zerodha, go to Zerodha website and click on ‘OPEN AN ACCOUNT’. Here is the direct link.

Note: You can find the detailed explanation on how to open your demat and trading account at Zerodha here.

9. Closing Thoughts

In the last decade, Zerodha has earned trust and respect among the trading population by providing reliable and technologically advanced trading services. It is definitely the largest discount broker in India. If you are looking to open your brokerage account with a reputable brand that offers low brokerages, and have a fast trading platform, Zerodha is definitely one of the best options.

That’s all for this post. I hope this Zerodha review is useful to you. If you have any additional queries regarding Zerodha or if you want to share your review of Zerodha, you can post it in our forum. I’ll be happy to answer your questions. Have a great day!

Kritesh Abhishek

www.linkedin.com/in/kriteshrules/

January 3, 2020 Kritesh Abhishek Online Brokers 11 comments

21 Do’s and Don’ts of Stock Market Investing for Beginners

Making money from stocks is simple if you strictly follow the do’s and don’ts of stock market investing. However, because of the lack of financial education, the majority of the investing population do what they are not supposed to ‘do’ in the market and vice-versa.

For example, the first and foremost rule to invest intelligently in stocks is to ‘not speculate’, but invest only after proper research. However, most people speculate in stocks and bet that the share price will go high in the upcoming days without any significant analysis.

In this post, we are going to discuss the do’s and don’t of stock market investing for beginners. Let’s get started.

21 Do’s and Don’ts of Stock Market Investing for beginners.

Do’s of Stock Market Investing

Here are a few of the do’s of stock market investing that every investor should follow:

1. Get an education

This is probably the most relevant do’s of stock market investing. If you really want to become a successful stock investor, start learning the market.

It doesn’t mean that you should enroll in a college program/degree. Self-education is the best way to learn. There are tons of free information available on the internet which you access to learn the market. Moreover, if you want to get a head-start, you can also enroll in a few good online stock market investing courses. Let the learning begin.

2. Start small

If you are just starting to learn how to swim, you won’t jump in 8 ft deep water, right? Similarly, when beginning to start investing in the stock market, start small. Invest the lowest possible amount and gradually increase your investments as you get more knowledge and confidence.

3. Get started early

I cannot emphasize enough on the importance of getting started soon with your finances. Time is in your favor when you start investing early. Moreover, here you get enough time to recover even if you make some losses during the early time of your investment journey.

Also read: Bunty and Babli: A financial story of how Bunty lost Rs 1,29,94,044!

4. Research before investing

One of the key reasons why people do not make money from stocks is that they do not put the initial efforts before investing in the share. Every investor needs to research the company before investing. Here you need to learn the company’s fundamentals, financial statements, ratios, management and more. If you do not want to regret later, research the company first before investing.

Also read: How To Select A Stock To Invest In Indian Stock Market For Consistent Returns?

5. Only invest what is surplus:

The stock market gives an immense opportunity to invest in your favorite companies and make money. However, there are always a few risks involved in the market, and no returns are guaranteed. Moreover, many times a bad (or bear market) may even last for years. Therefore, you should only invest the surplus money which does not affect your lifestyle even if you can’t get it out.

6. Have an investment goal

It’s easier to plan your investments (and to monitor your progress) if you have an investment goal/plan. Your goal may be to build a corpus of Rs 10 Crores in the next ten years or to build a retirement fund. Having a goal will keep you motivated and on track.

7. Build a stock portfolio

For making good consistent money from the stock market, just having two or three stocks is not enough. You need to build a winning stock portfolio of 8–12 stocks which can give you reliable returns.

Although it’s very less likely that you can find all the fantastic stocks to invest at once. However, year-after-year you can keep adding/removing stocks to build a strong portfolio that can help you reach your goals.

8. Average out:

It’s challenging to time the market and almost impossible to buy the stock at the exact bottom and sell them at the highest point. If you’ve done it, you might be lucky. A better approach here is to Buy/Sell in ‘steps’ (unless you find an amazing opportunity which the market offer sometimes).

9. Diversify

“Do not put all your eggs in one basket!”. The risk involved while investing in just one stock is way higher compared to a portfolio of ten stocks. Even if one or two of your stock starts performing poorly in the later scenario, it may not affect the entire portfolio too much. Your stock portfolio should be sufficiently diversified.

10. Invest for the long-term

It’s a common fact that all the veterans of the stock market who made an incredible fortune from stocks are long term investors. But why do long-term investing helps to build wealth? Because of the power of compounding, the eighth wonder of the world. If you want to build massive wealth from the market, invest for the long-term.

11. Hold the winners, cut the losers

Cut you losing stocks if they underperform for a long time and hold your winning stocks longer to allow them to offer even better returns. This is the golden mantra of investing that you should strictly follow. Moreover, keeping your winners and cutting losers will also help in building your dream portfolio.

Also read: The Biggest Investing Mistake that 90% Beginners Make!

12. Invest consistently

Most people get excited and enter the stock market when the market is doing well, and the indexes are touching new highs. However, if you only invest in a bull market and exit when the market is down i.e. when stocks are selling at discount, you will never find fantastic opportunities to pick cheap stocks.

Do not invest in the market just for a year. If you want to make good money from stocks, invest consistently and periodically increase your investment amount.

13. Have Patience

Most stocks take at least 1–2 years to give good returns to the investors. Moreover, the performances get better when you give more time. Have patience while investing in the share market and do not sell your stocks too soon for short term gratification.

Don’ts of Stock Market Investing:

14. Don’t take investing as gambling

Let me repeat this in simple words- “INVESTING IS NOT GAMBLING!”. Do not buy any random stock and expect it to give you two times return in a month.

Also read: 5 Signs That You are Gambling in Stocks.

15. Don’t invest blindly on free tips/recommendations

The moment you open your trading account, you’ll start getting free messages on your phone with BUY/SELL calls. But remember, there is no FREE lunch in this world. Why would anyone send a stranger free tips for multi-bagger stocks? Never invest blindly on free tips or recommendations that you receive, no matter how appealing they may sound.

16. Don’t have unrealistic expectations:

Yes, many lucky guys in the market have made 400–500% return on their single investment. However, the truth is that these kinds of news get quickly circulated (and inflated).

Have realistic expectations while investing in stocks. A return between 12–18% in a year is considered good in the market. Moreover, when you compound this return over multiple years, you will get way higher returns compared to 3.5% interest on your savings account.

Further, do not assume that you can get the same profits as others, who might be investing in stocks from many past years and may have acquired an amazing skill set. You can also get similar returns, but only after enough knowledge and practice.

17. Don’t over trade

When you are trading frequently, you are repeatedly paying for the brokerage and other charges. Don’t buy/sell the stocks too often. Take confident decisions and make transactions only when necessary.

18. Don’t follow the herd

Your colleague purchased a stock and made 67% returns from it within a year. Now, he’s boasting about it, and many of your office-mates are buying that stock. What would you do next? Should you buy the stock? Wrong!

No investor can get significant success from the market by following the herd. Do your own research, rather than following the crowd.

19. Avoid psychological biases/traps

There are a lot of physiological biases while investing that can adversely affect your investment decisions and your ability to make effective choices. For example- Confirmation Bias, Anchoring bias, Buyer’s Remorse, Superiority trap, etc.

Most of these biases are pre-programmed in human nature, and hence it might be a little difficult to notice them by the individuals. Anyways, knowing these biases can help you to avoid them causing any serious damage. Moreover, a good thing regarding these biases is that — like any habit, you can change or get over them by practice and efforts.

Also read: 5 Psychology Traps that Investors Need to Avoid!

20. Don’t take unnecessary risks

Investing all your money in a hot stock/industry to get a little higher return is never a wise move. Safeguarding your money is equally important than getting high returns. You should never take unnecessary risks while investing in stocks and your ‘risk-reward’ should always be balanced.

21. Don’t make emotional decisions

The human mind is very complex, and there are many factors both internal and external that can affect the choices we make. While investing in the stock market, do not take emotional decisions. No matter how much you like a company, if it is not profitable and doesn’t have a bright future potential, it may not be the right investment decision. Do not get emotional while making your investment decisions.

Bottom line

In this post, I tried to cover the do’s and don’ts of stock market investing for beginners. However, this is just a guide and not a manual. You will learn more do’s and don’t through your personal experiences when you start investing on your own.

I hope this article is useful to you. Have a great day and happy investing!

Kritesh Abhishek

www.linkedin.com/in/kriteshrules/

January 3, 2020 Kritesh Abhishek Invest Intelligently, Investment Basics 7 comments

How to Open a Demat and Trading Account at Zerodha?

How to open a demat and trading account at Zerodha? (Updated: Jan 2020)

When I first started investing, I used ICICI direct as my stockbroker for opening my demat and trading account. Although I was happy with the facilities and platforms provided by it, I soon realized that ICICI Direct was very expensive.

Many times, profits were killed by the brokerages in ICICI direct. The worst part was paying too much of brokerage even when you were selling the stock at a loss.

Then I asked for feedback from my friends who were using SBI Smart and HDFC securities. They both were also paying high brokerages and suggested not to go with them.

Finally, after researching a lot, I opened my second demat and trading account at ZERODHA.

Zerodha is the biggest discount broker in India with over 10+ lakhs customers. It contributes to over 15% of all retail order volumes in India daily by trading and investing in NSE, BSE, MCX, and MCX-SX. The charges offered by Zerodha are nominal and the trading platform provided by it is also fast and friendly.

It charges a brokerage of 0.01% or Rs 20 per executed order, whichever is lower, irrespective of a number of shares or their prices.

This is way cheaper compared to ICICI direct which asked a brokerage of 0.55% on each transaction in equity. If you buy stocks for Rs 50,000 in ICICI direct, then you have to pay a brokerage of Rs 275 (On the other hand, Zerodha will ask for a maximum of Rs 20 any trade). Further, as this amount is charged on both sides of the transaction (buying & selling), hence you have to pay a total of Rs 550 for the complete transactions (which is way too expensive than Zerodha).

In short, if you are new to the investment world, I would recommend opening accounts in discount broker such as Zerodha so that you can save lots of brokerages.

To get started, here is the direct link to the account opening page at Zerodha.

Why should you open a demat and trading account at Zerodha?

If you are still confused about why you should open a demat and trading account at Zerodha, then here are top reasons:

Rs 0 (FREE) for equity delivery trades.
Rs 20 or 0.01% whichever is lower per executed order intraday trading and for everything else
Same pricing for across all exchanges
No upfront fee or turnover commitment
Z-Connect, interactive blog, and portal for all your queries
Over 1.5 million happy customers with a reputable brand name
300+ dedicated support team to ensure the fastest turnaround time for your queries via email or phone
Trading, charting, and analysis, all rolled into one next-generation desktop platform Pi.
Minimalistic, intuitive, responsive web-based trading platform Kite
Average exchange margin utilization of 55% vs. an industry average of 70%—lower risk.

Also read: Zerodha Review –Discount Broker in India | Brokerage, Trading Platform & More

How to open a demat and trading account at Zerodha?

Documents required to open a demat and trading account at Zerodha.

Here are the documents required to open a demat and trading account at Zerodha. I will recommend keeping soft copies of all these documents ready before you apply for opening the accounts as you’ve to upload them during the account opening process:

PAN CARD
Aadhar Card
Canceled cheque/ Bank statement
Your Signature on a piece of paper
Passport size photos

*Optional– Income proof: It is mandatory to submit income proof if you wish to trade in Futures and options – Equity, Commodity, and Currency. You can submit Form-16, IT acknowledgment copy, 6-month Bank statement or your latest salary slip as proof. Anyways, ignore this document if you are planning to invest only in just stocks, and not in derivatives, commodity or currency.

Account opening charges at Zerodha

Here are the account opening charges at Zerodha

Demat and Trading Account: Rs 200
Commodity Account: Rs 100

(Note: This is the Revised account opening charges updated in December 2019 by Zerodha)

If you want to trade in both equity and commodity, then you need to pay an account opening charge of Rs 200+Rs 100 = Rs 300. However, if you want to trade just in equity (stocks), then you need to pay the charge of Rs 200 only.

Now, there are two ways to open a demat and trading account at Zerodha:

Online method
Offline method

Using the online method, you can open your account with Zerodha within 15 minutes, if you have all the required documents.

However, in the online method, to complete the eSign process, you will have to authenticate it with an OTP. So, make sure you have the number is linked to your Aadhaar. If not, you will not be able to complete the process. If the number linked to your Aadhaar is inactive, or if you don’t have any number linked, then you can visit your nearest Aadhaar Seva Kendra to get it updated.

Anyways, if you don’t want to use your Aadhaar, you can still open your account via the offline route. However, I would recommend you to open online as it is fast and easier.

In the trading world, you need to be tech-savvy and comfortable with doing things online. All the transactions (buy/sell) etc that you’re going to perform in future, once your account is opened, will be online and through advanced trading platforms. They will require you to be technically smart. And therefore, start taking the online route as you can’t ignore the digital path in the future.

How to open your account with Zerodha Online?

Short Answer to Open Your Zerodha Account

First of all, let me give a short answer on how to open your account at Zerodha before my step-by-step explanation.

To get started, here is the direct link to the account opening page at Zerodha.

On this page, the front step is to signup using your mobile number and verifying the OTP. Then you’ll be required to enter your PAN, bank account, Aadhar verification, and personal details to continue with the signup.

All the instructions are clearly mentioned in the each-step of the account opening page. If you are good at reading and following instructions efficiently, then you do not need to read this entire post. Just go to the account opening page, follow the instructions, upload the documents and your account will be opened.

Besides, if you face any difficulties while opening an account online, you could contact Zerodha at – 080 4913 2020.

A Quick Intro to DigiLocker

While opening your account online with Zerodha, it will ask you to connect with your DigiLocker account. However, if you are new to DigiLocker, let me give you a quick introduction about it.

I was quickly impressed with DigiLocker concept when I first heard about it in early 2017. DigiLocker is an online service provided by the Ministry of Electronics and IT, Government of India under its Digital India initiative. I always keep this app on my mobile phone and let me tell you why.

If you live in a city, many times, you may face a similar situation like this. You went out to buy some groceries from a nearby shop or to drop someone. And because of a hurry, you forgot your wallet. This means that you don’t have your Driving license or vehicle registration doc with you. Next, if a traffic police stop you, then it might be a little trouble for you to explain to them why you traveling without docs.

However, if you have the DigiLocker app on your phone, you can show the driving license and vehicle registration from the app itself. Motorists can show docs in Digi locker during a traffic check as it is provided by the government of India. Moreover, it is more secure and acceptable by traffic police compared to the camera pic that you keep in your phone gallery.

Further, you can also keep all your other important docs in DigiLocker app like Aadhar card, Pan Card, Driving License, Voter Id, Education certificate, etc.

Overall, if you don’t have a DigiLocker account yet, I’ll highly recommend you to open one and download the app on your phone. It will help you to keep all your docs secured.

Moreover, this account is required while performing Aadhar verification during your Zerodha Account opening.

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Detailed Step-by-step procedure to open your account with Zerodha online

Now that you’ve got a basic idea of how to open your account at Zerodha online and what are the docs/things required, next, let me give you a detailed step-by-step explanation of the process:

Step 1: Go to the Zerodha account opening page on your browser. Here is a direct link.

Step 2: Enter your mobile number to sign-up. You’ll receive an instant OTP to verify the mobile number.

Step 3: Enter your full name and email id. Please enter your email address correctly as you’ll again receive an OTP to verify your email id. This is the same email where you’ll receive all your future correspondence from Zerodha. Enter the OTP that you’ve received on your email to verify your email address.

Step 4: Next, enter your PAN and date of birth (DOB) details in the field provided.

Step 5: Complete the account opening payment.

For equity– you’ve to pay Rs 200 and for commodity, the charge is Rs 100. You can complete the payment through UPI or Net-banking/Card payment.

Tick the checkboxes according to your requirement and click on ‘Pay & Continue’ button. Make sure to uncheck the commodity account, if you’re not planning to trade in it and save Rs 100.

After payment, you will see the Congratulations message displayed on the screen and receive an email regarding the payment confirmation.

Step 6: After completing the payment, it will ask you to connect Aadhar details via Digilocker.

As already mentioned earlier, you need to create a ‘DigiLocker: Towards Paperless Governance’ account and link your Aadhar with it. Click on ‘Connect to DigiLocker’ and this will open a new page to sign up to Digilocker using your phone number.

If you already have an account, click on ‘Sign in’ option in the bottom.

Step 7: After entering your DigiLocker account, select the Aadhar card. If you’re just created a new account, enter your Aadhar number and verify using OTP received on your phone.

After that, you need to click on ‘LINK YOUR DIGILOCKER WITH ZERODHA’.

Step 8: Once your Aadhar verification is complete, a new screen will come displaying “Let’s finish the application”. Here, you need to fill up more details starting by filling up Bank Details i.e. your bank account number, bank name and branch’s IFSC Code.

Below that, you have to fill some details like Marital status, Father’s first name, Father’s last name, etc. After entering the details, click ‘CONTINUE’

Step 9: Next is IPV Verification over webcam/phone.

IPV or In-person-verification is a process where a depository participant in personal verifies documents and other details as per the law by SEBI. It is compulsory for every investor to go through the in-person verification process before opening a demat and trading account.

Here, they’ll display an OTP on the screen. You need to write down this OTP show on a piece of paper or your smartphone. Then, hold the piece of paper/ mobile phone with the code in front of your mobile phone/ webcam.

Click on “Start IPV”, then click on “Take Video” and finally on “SAVE IPV”.

Step 10: Next, you will have the option to either Digitally sign the application with Aadhaar (mobile OTP) or else print & courier it. I will suggest you selecting Aadhaar Option as it is a faster approach.

Step 11: Upload scanned copy of the documents: Bank Account Proof, your current signature, PAN. Income Proof is optional & only required if you want to trade Futures & Options, currency, and commodity.

Step 12: Next, it’s time to eSign. Click on ‘eSign Equity’ button and proceed to the next step. Enter the ‘Security Code’ received on your registered Mobile no/Email and click on ‘submit’.

Step 13: In the next window, enter your Aadhaar number, tick the checkbox and click on ‘Request OTP’ button. Here, enter the OTP number received on your mobile. With this the eSign process for Equity is complete.

Note: If you also opted for commodity trading account, repeat the same process by clicking on ‘eSign commodity’ as shown in ‘Step 12 ‘.

Step 14: Once you’ve completed the application sign up, you will have to download the Demat POA (Power of attorney) form, fill it up & send it to the address mentioned below.

Address:

Zerodha, #153/154 4th Cross Dollars Colony,
Opp. Clarence Public School,
J.P Nagar 4th Phase,
Bangalore – 560078

Besides, here are the complete instructions on how to fill the POA form.

Note: Although you can start trading from the day you receive your client-id and password, nevertheless, do send the POA and nomination documents as soon as possible. If your POA has not been received by Zerodha, then you won’t be able to sell the stocks (however, you will be able to buy stocks). Hence, do fill and send the documents as soon as you can.

Offline Account Opening Process

How to open your demat and trading account with Zerodha offline?

You can also open your account with Zerodha offline. However, the offline account opening charges are different than the online charges. Here are the charges for offline account opening:

Rs. 400 – for Trading & Demat Account
Rs. 600 – for Trading, Demat & Commodity account

In this approach, you will have to download application forms from Zerodha website, print out the forms, fill it up and sign it. If you need help at any point in filling out the application form you can call us on 080 4913 2020.

Here are the applications forms that you’ll need to fill and courier for account opening:

Application Form: Trading Account & Demat Account – Equity Segment
Application Form: Commodity segment
POA (Power Of Attorney) – Already included in the Application form above
ECN (Electronic Contract Note) for enabling Commodity segment – Already included in the application form 2
Nomination Form: In case you would like to appoint a nominee to your trading and DEMAT account like your wife, father, mother or any other.

The documents required for opening your account offline is the same as that of the online process. You need to get a photocopy of your PAN Card, Address proof (Aadhar Card, Driving License, Voter-Id etc), Cancelled Cheque/Bank statement, Income proof & Passport size photographs. You also have to cross sign as self-attest on all these docs. You can find the list of all acceptable docs for account opening here.

Once you fill it up and sign it, you have to send the application forms over to the Zerodha head office address:

#153/154 4th Cross Dollars Colony,
Opp. Clarence Public School,
J.P Nagar 4th Phase, Bangalore – 560078

Alternatively, you can schedule a meeting with a Zerodha representative at an address, date and time as per your convenience, by calling up the account opening helpline (080 4913 2020) or by placing a request with the sales manager assigned to you.

Here, a Zerodha representative will contact you and direct you to keep all such necessary documents ready at the decided time and place of the meeting. The representative would take all necessary signatures and self-attested documents/attachments as required to complete the account opening procedure.

What Next After Opening Your Zerodha Account?

Once your account is open, you can log in to this link or use the KITE app on your mobile. Here’s the link to the KITE trading platform.

Alternatively, you can also download the KITE app on android/iOS to start trading/investing in stocks. Besides, you can find the list of other Zerodha products like Console, Coin, Connect API, etc here.

Closing Thoughts

I will recommend using the online method while opening your account. Zerodha is working towards the Digital India initiative and you should be a part of it too. Although online methods seem to have too many steps, they do not take too long. Once you’ve started the application form, you can build a flow and complete the form within 15-20 minutes.

The offline method is good if you do not have an Aadhar card and you want to provide another address proof like Driving license, Voter Id, etc. However, if you are living in a village/small city, it might be a little difficult for you to get a Zerodha executive. Moreover, the offline method can easily take 7-10 days to open a demat and trading account.

That’s all. These are the steps to open a demat and trading account at Zerodha, online and offline. I hope this post on ‘How to open a Demat and trading account at Zerodha?’ is useful to the readers. If you have any doubts, comment below.

Kritesh Abhishek

www.linkedin.com/in/kriteshrules/

January 2, 2020 Kritesh Abhishek Online Brokers 104 comments

Zerodha vs 5Paisa Compare Brokerage, Margin, Charges & More

Zerodha vs 5Paisa: Compare Brokerage, Charges, Margin & More!

Zerodha and 5paisa are two of the biggest discount brokers in India. In this article, we are going to compare Zerodha vs 5Paisa by looking into their brokerage charges, account opening charges, maintenance charges, exposure margin, trading platforms and more.

This comparison between Zerodha and 5Paisa will highlight the major differences between these two brokers to help you find the best between 5paisa and Zerodha, based on your preferences.

Zerodha Introduction

Zerodha, founded in 2010 by Nitin Kamath, is the biggest discount broker in India and perfect for traders & investors looking for low brokerage, easy interface, and reliable trading platform. It has over +1.5 million clients that contribute to over 15% of daily retail trading volumes across BSE, NSE, and MCX.

In terms of brokerage charges, Zerodha offers a zero brokerage for delivery equity investment & direct mutual fund investments. For all intraday, F&O, currency, and commodity trades across NSE, BSE, MCX, it offers a flat brokerage of Flat ₹20 irrespective of the trading volume. Therefore, you can save a lot of brokerage charges on your trades using Zerodha as your broker.

Also read: How to Open a Demat and Trading Account at Zerodha?

5 Paisa Introduction

5Paisa is a discount broker that provides you the platform to trade in stocks, futures, and options at the lowest cost of Rs 20 flat per trade, even if you trade for Rs 10 Crore.

It is headquartered in Mumbai and is a part of India Infoline (IIFL), a leading non-banking financial institution in India with experience of over two decades (initially incorporated in 1995). 5paisa was re-launched with a new brokerage model for online retail broking services in late 2016. Later, it got de-merged from IIFL so that it can be listed on the stock exchanges. 5Paisa Capital started trading on NSE/BSE in November 2017, making it the first such listed financial digital marketplace.

5 Paise Capital provides a platform for all financial products including equities, derivatives, mutual funds, AIFs, bonds & debentures, insurance, and personal loans. The account opening process for 5Paisa is totally paperless based on Aadhaar. 5Paisa provides the trading facility in mobile, browser and desktop platforms.

Zerodha vs 5Paisa Comparision:

Name	Zerodha	5 Paisa
About	Zerodha is the largest stockbroker in India with +1.5 million clients and +10% of daily retail trading volumes across NSE, BSE, MCX. Located at Bangalore, Zerodha offers zerod brokerage on delivery trading and a flat rate of 0.01% or _20 per executed on all other segments.	5paisa.com, second largest discount broker in India, is part of IIFL group (India Infoline), India's leading financial services company. It offers a flat brokerage of Rs 20 per trade for its clients.
Founded	2010	2016
Company	Private	Public
Main Office	Bangalore	Mumbai
# of Active Clients on NSE (Nov 2019)	9,09,008	1,06,280
Broker Service	Discount Broker	Discount Broker
Supported Exchange	NSE, BSE, MCX, NCDEX	NSE, BSE
Brokerage Summary	Free for Delivery Trading and flat charge of Rs 20 for all other trades	Rs 20 Per Trade
Servies offered	Equity, Derivatives, Currency, Mutual Funds & Commodities	Equity, Derivatives, Currency, Mutual Funds
Account Opening Charge	Rs 200	Rs 650
Commodity Trading Opening charge	Rs 100	Can't trade in commodity
Annual Maintenance Charge	Rs 300	Rs 45 per month (only for months when you trade)
Trading Platform	Kite 3 Web baased trading platform, Kite Mobile, Kite Connect API, Console, Pi, Sentinel, Coin	Investor terminal, trader terminal, 5 Paisa Trade Station
Brokerage Charges
Equity Delivery	Free	Rs 20 per trade
Equity Intraday	Rs 20/ trade or 0.01% whichever is lower	Rs 20 per trade
Equity Future Charges	Rs 20/ trade or 0.01% whichever is lower	Rs 20 per trade
Equity Options Charges	Rs 20/ trade or 0.01% whichever is lower	Rs 20 per trade
Currency future charges	Rs 20/ trade or 0.01% whichever is lower	Rs 20 per trade
Currency options charges	Rs 20/ trade or 0.01% whichever is lower	Rs 20 per trade
Commodity Charges	Rs 20/ trade or 0.01% whichever is lower	NA
Minimum brokerage fees	0.01% Minimum	Flat Charges Rs 20
Call & Trade Charges	Rs 20 + 18% GST Order	Rs 100/ call
Margin Offered
Equity Margin Delivery	No margin for delivery - Cash and carry	Upto 4x for equity cash
Equity Margin Intraday	Upto 20x (Based on stock)	Upto 20x
Equity margin futures	Intraday - 40%(2.5x), Carry forward - 100%(1x) of Total margin	Intra-day: 3.5x - Carry forward: 1x (no margin)
Equity margin options	Intraday - 40%(2.5x), Carry forward - 100%(1x) of Total margin	Intra-day: 1x - Carry forward: 1x
Commodity Margin	Intraday - 40%(2.5x), Carry forward - 100%(1x) of Total margin	NA
Currency futures	Intraday - 40%(2.5x), Carry forward - 100%(1x) of Total margin	Intra-day: 1 time - Carry forward: 1x
Currency Options	Intraday - 40%(2.5x), Carry forward - 100%(1x) of Total margin	Intra-day: 1 time - Carry forward: 1x
Addons
3-in-1 Account	Yes, with IDFC Bank	No
Research & Tips	No	Yes (for higher plans)
Brokeage Calculator	Yes	Yes
Span Margin Calculator	Yes	Yes
Training & Education	Yes	Yes
Interactive Charts	Yes	Yes
Margin Against Shares (Equity Cash)	Yes	Yes
Margin Against Shares (Equity F&O)	Yes	Yes
IPO Services	Yes	Yes
Robo advisory	No	Yes
Other Features	Direct Mutual fund investments, Kite APIs	Mutual Fund Investments, Research reports
Pros	Zero brokerage charges for delivery trading, Simple and flat brokerage model in all other segments, Excellent trading platforms, Easy & fast online account opening, Direct mutual fund investments, Maximum brokearge of Rs 20	Cheapest broker, flexible brokerage plans, Research reports availalble (but at extra cost)
Cons	No stock advisory or research reports	MCX and NCDEX Commodity trading unavailable, Call and trade Rs 100 per call, Higher charges of Rs per transaction on demat
Promotion/Offer	Free delivery equity trading and Rs 20 or 0.01% wihchever is lower brokerage charge on all other trades	Right now - No Opening Charges, Annual maintence charges waived
Website	Quick Link to Open Account	Quick Link to Open Account

*Disclaimer: All pricing data was obtained from the published stockbroker’s web site as of 02/01/2020 and is believed to be accurate, but is not guaranteed. It can vary from time to time depending on the active campaigns by the brokers and hence recommended to refer to the broker’s website for the latest updates.

Also read: 8 Best Discount Brokers in India – Stockbrokers List 2019

Closing Thoughts

Both Zerodha and 5Paisa offers low brokerage and fast trading platforms for their clients.

Zerodha, being the biggest discount broker in India with over 15 lakh clients obviously adds trust and brand value. Moreover, initiatives like educational facility (Varsity), investment in IPO’s from the same dashboard, free direct mutual fund investments, etc create more value for its clients.

A few notable advantages of 5Paisa over Zerodha is that they offer Research reports and robo-advisory to their clients, which Zerodha don’t. However, this facility by 5Paisa is offered only to its clients with higher plans. Anyways, 5Paisa doesn’t offer commodity trading, which may be one of the cons for active traders.

Overall, Zerodha offers a little more benefits compared to 5Paisa for independent investors and traders.

January 2, 2020 Team Trade Brains Online Brokers 2 comments