The changing face of retail investing

The changing face of retail investing

A quiet revolution is taking place in the mode of retail investing in India. More and more people are opting for online platforms for their investment needs. Internet has made life easy for people who want to do the investing themselves. Today, technology enables you to trade at any time you like with the click of a mouse. You can also invest in IPOs, mutual funds and commodities online.

Trading in stocks has become relatively faster and transparent through online platforms. You can buy and sell shares from the comfort of your home or office and not be at the mercy of a broker to execute your trades. The share of online trading has grown from just 3 per cent of the total turnover in 2003-04, accounting for one sixth of the total turnover of the markets.

How to trade online?
To trade online you will require some ‘hardware’ in the form of computer or laptop along with a net connection. The next step would be to register as a member with any of the brokers who offer online trading platforms. Most of the online brokers offer integrated accounts whereby the trading account is linked to de-mat account and a bank account. The trading account enables you to transact online, the internet enabled bank account helps in transferring money to and from the broker’s account and a de-mat account, where your shares will be deposited. Once you are registered with a broker all you have to do is to transfer funds to the broker’s account start investing. Brokerages do provide a lot of research content on stocks on their websites and offering advisory products to encourage trading and thereby increase their brokerage revenues.

Brokerage rates charged by various e-brokers differ vastly. Some of them charge less for day trading. With some the rates reduce as volume of trading increases. For example, one e-broker charges 0.55 per cent for a quarterly volume of less than Rs. 10 lakhs and 0.25 per cent for an amount in excess of Rs. 5 crores. In the beginning when you open an account the rate is determined by the opening amount of investment, irrespective of the subsequent investments in that quarter. In the next quarter the opening amount determines the brokerage that will be paid in that quarter. Another e-broker charges Rs. 500/- for delivery-based volumes up to Rs. 10 lakhs for two months, while others have a flat fee irrespective of volumes. Some of them charge annual maintenance charges separately for the depository account.

Choosing the right e-broker
Your choice of the right e-broker will depend of your style of investing. If you are a long time investor then your volume of transactions will be lower and you would like to go with an e-broker who offers a low flat brokerage. Daily traders may opt for one who reduces brokerage with an increase in volume of trading. When selecting the right e-broker apart from brokerage qualitative factors matter too. The pedigree of the e-broker, the reliability of their website, speed of trade, ease of fund transfer, research and the customer service are some of the qualitative factors you should keep in mind before deciding a online broker.

Benefits of online account
Online accounts have made investing “hassle-free”. In offline you have to manually maintain separate bank, trading and de-mat accounts. The inter-account transfers are done through cheques and delivery instructions that involved lot paperwork and delays. Here there is literally no paperwork involved and the funds are transferred instantaneously. All transaction records are online and statements available in digital form. You also get access to information and analytical tools that enable you to take more informed decisions. It’s not surprising that people are going online to try their hand at emulating Warren Buffet!

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