Your demat account charges may reduce soon   Mar 28, 2012


Incentives can do wonders when given in the right amount and in the right way. But more often than not investors pay a heavy price for taking investment decisions driven purely by incentives. When incentives are luring, greed overpowers rational thinking and leads investors to make the silliest mistakes they could have avoided.

It seems that the Security and Exchange Board of India (SEBI) too, is trying to incentivise small investors in opening a demat account so that ultimately investors invest directly in the equity markets. Let’s find out how.

The SEBI is exploring the option of low-cost, no-frills demat account to encourage more investors to take exposure to the equity markets. At present, the relatively high cost of maintaining a demat account discourages many investors who wish to invest small amount of money in equities. Also, demat accounts that have only few transactions every year will be treated as a no-frills account and attract substantially lower charges. The initiative to drop the cost of accessing equities market follows the Finance Minister – Pranab Mukherjee's budget announcement of a ‘Rajiv Gandhi Equity Savings Schemes’ that is aimed at encouraging flow of savings into shares and deepening the capital market.

Impact on the investors...
The move will drastically reduce the demat account charges for those individuals who undertake few transactions in the equity markets. The above proposal may also spice up competition amongst the brokerage houses to reframe their demat accounts in order to attract more investors.


Our view:

In our opinion the SEBI’s initiative to attract retail investors to participate in the equity markets is a fair idea, considering the fact there is very low retail participation as compared to the FIIs which drive the Indian equity markets. Low-cost demat accounts will make sure that the charges paid by the small investor in the equity markets do not exceed the gains on their investment.

However, any investor who wishes to invest directly in the equity markets should keep in mind that investing in the right stock at the right time is not as easy as it seems. It requires a lot understanding, studying and researching on the particular company before taking the final decision of investing one’s hard earned money. Hence, an investor who is unable to devote sufficient time to research and study companies should adopt the mutual fund route to equity markets. Over here too, expert advice is imperative while selecting winning mutual funds for one’s portfolio.


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Comments
ruthieepstei@globomail.com
May 10, 2012

stock market index is a listing of a group of stocks, and a number to go with them. The number that goes with them is used to track trends in the market, going up or down when the market does. In general the stocks have something in common, such as trading on the same exchange, or belonging to the same industry. The Indexes can be classified in a wide variety of ways. The most widely quoted Index in the world, the Dow Jones Industrial Average, is a broad based index designed to reflect the stock market as a whole and give an idea of investor sentiment on the state of the economy.
moosmann@imtek.uni-freiburg.de
Oct 15, 2013

Super informative writing; keep it up.
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