Tips for Beginners on How to Ch0ose a Stockbroker: Selecting your online stockbroker is one of the biggest steps that you will take while entering the world of investing. You cannot start investing or trading in stocks in India until you have a stockbroker (unless you are using someone else’s account :D). These stockbrokers offer demat and trading accounts that are essential for the investors to buy/sell stocks.
When I first opened my brokerage account, I had no one to guide me. I belong to a family where no one invests in stocks. My father has few holdings in mutual funds (paper certificates) and LICs. However, he never had an online stock broking account and never invested directly in the stock market. Therefore, I had to go through a number of websites to educate myself about where to start and how to choose a stockbroker in India.
That’s why I am writing this post for beginners so that they don’t have to go through all those troubles and also can save a lot of time. In addition, I’ll also recommend the three best stockbrokers in India for beginners for the ease of the readers. Let’s get started.
Word of Advice: Picking your first Stockbroker
First of all, I would like to mention that your first broker doesn’t necessarily is required to be your stock broker for life. You can definitely switch to another broker anytime you like. Moreover, you can even transfer your existing shares from one brokerage account to another. Personally, I have also switched brokers from ICICI Direct to Zerodha.
However, it is not recommended to switch brokers as it involves some hassles and wastes time unnecessarily. Why not go with the best stockbroker itself so that you don’t have to switch accounts later. Moreover, it is good to start with a suitable broker, and choosing a bad stockbroker may ruin your first experience in investing/trading. In addition, it may also cost you some bucks as switching costs if you moved to another broker.
Next, you’ll need to open Demat and Trading Accounts (2-in-1 account) with your stockbroker. Most brokers offer these two accounts altogether. These accounts are necessary to invest or trade in stocks in India.
Before we dive into the topic, let me give you the smallest explanation of what’s the difference between demat and trading accounts so that we are all on the same page.
Just as money is kept in your savings account, similarly your bought stocks are kept in your demat account. When you buy a stock, it gets credited to your demat account. And when you sell it, it gets debited from the same. At any time, your demat account reflects all your holding stocks. By the way, a demat account is a short form for a ‘Dematerialised account’.
On the other hand, a trading account is a medium to buy and sell shares in a stock market. It is used to place purchase or selling orders for a stock in the market. Here’s a guide to learn more about demat and trading accounts in India.
How to Choose a Stockbroker? – Factors to Consider
In order to Choose a Stockbroker in India, it is required that you spend some time researching about the stockbrokers. Conduct your own independent research. Listen to the advice of the experienced investors on which stockbroker they use, but do not follow them blindly. Their requirements might be different from yours. You can carry out your own research. Get a general idea about the stockbroker, their account opening charges, facilities offered, trading apps/websites etc.
Next, there are a number of factors that you need to check before choosing your stockbroker. Here are a few of the must-check factors while choosing a stockbroker in India:
– Background & Reputation of the broker
The first step is to check the background of the stockbroker and their reputations. How old are the brokers and what their customers say about their platforms? You can read the reviews, complaints and have a survey of the personal experience of the existing users. If you are going to use the mobile app to make investments, check the mobile app ratings on the google or app store.
Another way of checking the reputation of brokers is by looking into how big they are based on their total number of active clients. The bigger the stockbroker, the more stable will be its trading platform. Here’s a list of 15 of the biggest stockbrokers in India based on the number of clients as of 28 Feb 2021:
|S No||Name of Stock Broker||# OF ACTIVE CLIENTS||Market Share (%)|
|1||ZERODHA BROKING LIMITED||6277434||17.42%|
|2||(UPSTOX) RKSV SECURITIES INDIA PRIVATE LIMITED||5215523||14.47%|
|3||(GROWW) NEXTBILLION TECHNOLOGY PRIVATE LIMITED||3847955||10.68%|
|4||ANGEL ONE LIMITED||3657550||10.15%|
|5||ICICI SECURITIES LIMITED||3031192||8.41%|
|6||5PAISA CAPITAL LIMITED||1754330||4.87%|
|7||KOTAK SECURITIES LTD.||1256001||3.49%|
|8||HDFC SECURITIES LTD.||1141264||3.17%|
|9||IIFL SECURITIES LIMITED||1132766||3.14%|
|10||MOTILAL OSWAL FINANCIAL SERVICES LIMITED||896851||2.49%|
|12||SBICAP SECURITIES LIMITED||635384||1.76%|
|13||AXIS SECURITIES LIMITED||422358||1.17%|
|14||PAYTM MONEY LTD.||404376||1.12%|
|15||FNO INDIA SECURITIES PRIVATE LIMITED||262750||0.73%|
– Brokerage and Other Key Charges
Stockbrokers are the registered members of the stock exchange and they facilitate buy & sell orders in the share market for their clients. They charge some commission for offering this facility known as brokerage charge.
Now, there are two types of stockbrokers in India: A) Full-service broker & B) Discount broker.
A full-service broker provides advisory service and other premium facilities along with the trading platform. These brokers charge high commissions on every trade their clients execute as a percentage of each trade executed. On the other hand, discount brokers only provide the trading facility. They offer low brokerage and charges a flat fee per transaction.
Read more here: Full service brokers vs discount brokers: Which one to choose?
Choose a suitable broker according to your preference. If you want stock research advisory, research reports, and other personalized facilities, go with a full-service broker. If you are planning to invest or trade on your own and want to may the least brokerage, go with a discount broker.
Brokerage Charges for different brokers:
- Full-service brokers: 0.3-0.5% of Turnover of Delivery | 0.1-0.275% of Turnover on Intraday
- Discount brokers: FREE for Delivery trades | Flat Rs 10 or 20 for All other trades
These days, most investors and traders are preferring discount brokers (like Zerodha, Upstox, Angel Broking, etc) as it helps them to save thousands of rupees which is deducted as brokerage. Moreover, many discount brokerage firms have started offering premium features to their clients at no additional cost.
Quick Note: You can use this brokerage calculator to get an idea of how much brokerage and other charges you’ll pay while trading or investing in stocks.
— Customer Services
If you are new to investing/trading, you will require some customer service, unless you already have a mentor or advisor. Check the customer service provided by the stockbroker.
Investing using online platforms is easy to use and has a number of resources available on the internet. However, there may be a few times when you will require technical support. It’s good to have someone to look for in such cases. Do not avoid customer services. Look for the reviews before opting for any stockbroker and if the customer service is poor, then search another broker.
An easy way is to try calling their customer care helpline number. If it takes years for the customer executive to pick up the phone, then avoid that stockbroker. Further, if you want one-to-one customer service, then check the website of the stockbroker if they provide personal services. In addition, you can also look into if Investors Education initiatives or archives of issues are available that you can navigate through in case you’ve stuck anywhere.
— Trading Platforms Offered
This is one of the most important factors to examine. Inspect whether the trading platform offered is friendly, its user interface, latency, and easy to use. Check the demo videos of the trading platform on youtube. Moreover, also read the reviews of the mobile app on Google and iOS platform.
Checking the trading platform is the key factor while choosing a stockbroker and all other factors are secondary. This is because you’ll spend a lot of time on the trading platform only to make your buy/sell orders. If you’re not comfortable with the platform, it will be a lot of trouble for you.
— Advisory & Research Facilities
If you are ‘not’ planning to invest on your own and need an advisory/ research report, then check for the facility offered.
The reliability of the advisory is also a must to check. The stockbroker should have a good reputation in advisory and research works. Many leading stockbrokers in India offer Research reports and advisory facilities like Angel Broking, ICICI Direct, Motilal Oswal, Sharekhan, etc.
– Range of Facilities Offered
If you are looking for diversified investing and trading options, look for the one stockbroker which offers all. For example, if you’re planning to trade in Stocks, Derivatives (futures & options), currencies, commodities etc, then look for a broker that offers the facility to trade in all, not in just one.
Similarly, if you’re planning to also invest in other options like mutual funds, bonds, etc, then check if this range of facilities is available with that broker or not. These days, most leading brokers offer services in multiple investments and trading instruments.
— Hidden Charges
There should be ‘no’ or minimal hidden charges while investing and trading. All the charges incurred while transactions should be specifically mentioned. Aske for any hidden charges with your customer care executive before selecting the stockbroker. Besides, you can also check the pricing and charges section of the stockbroker to know about all the charges that must be paid by clients.
Most stockbrokers offer brokerage calculators on their websites now. Remember, transparency is the key to any service.
— Fund Transfer
The easy linking facility of your trading account with your saving account should be available. Look for the fund transfer process in your stockbroker. Online money transfer and withdrawal should be fast and easy. Moreover, also check if there is any fund transfer fee with that stockbroker.
— Tools for Education/Learning
Many stockbrokers provide education facilities to their clients. For example, Zerodha educates its clients via ‘Varsity’ and through its blog for free. If you are in the learning phase, look if any tools of education are available with your stockbroker.
This is not a ‘must have’ factor for your stockbroker, however, it can be a worthy add-on.
Related Post: How to Open a Demat and Trading Account at Zerodha?
A few other points to know while Choosing Stockbroker
Most of the important points while picking your stockbroker are already covered above. However, there are few other points also that a beginner should know on how to choose a stockbroker. They are listed below:
– Discounts and low-commission are not always good:
If you are new to the market and you will need a lot of help in the service while getting started. Although, it’s good to pay less, however, if you are getting premium facilities at a commission, it’s better for beginners. Once you are experienced, you can carry out your investing/trading on your own.
Further, these days, there are a lot of discount brokers in India which offer the cheapest brokerages. You have multiple options even in the discount brokers. Do not always go with the cheapest one, but also look into the other factors discussed in this article.
— Offline/Local Branches Availability
There are very few offline branches of discount brokers, whereas there are tons of branches of older full-service brokers. For newbies who are not that comfortable online, offline branches can be a good alternative. If you can find a branch in your city, where you can easily go and personally meet the customer care executive to clear all your doubts, then it’s good to go.
— Look for Extras/Add-ons
Many stockbrokers provide extras like FREE Account Opening, or ‘No Annual Maintenance Charges (AMC), free additional vouchers, etc. Check the add-on and added benefits. It’s always good to have some bonuses.
Top Picks For Best Demat & Trading Account in India
|No 1 STOCKBROKER IN INDIA|
Free equity investments | Flat ₹20 intraday and F&O trades
|GET FREE DEMAT ACCOUNT|
0 Brokerage on Equity Delivery | Rs 20 per order for Intraday and F&O trades
|GET FREE DEMAT ACCOUNT|
ZERO Brokerage on Intraday Trades | All other F&O at ₹20 per order
That’s all for this post on how to choose a stockbroker in India. The points discussed in this article are key factors to look at before selecting stockbrokers. I hope this post on How to choose a stockbroker? was helpful to you. If you have any doubts, feel free to comment below. I will be happy to help you out. Have a great day and Happy investing.