What Is A Brokerage Account And How Do I Open One?

What is a brokerage account?

A brokerage account can be defined as the account where you keep your money which you want to utilize while trading or investing. A brokerage account is also known as a taxable account because whatever profit you make while trading or investing through the funds in the brokerage account is taxable. Further, it provides you the facility to trade in various types of domains such as money market, various types of trading in the share market like margin trading, gold, ETFs (Exchange Traded Funds), etc.

Whenever you place a buy order for a share, the money is deducted from your brokerage account. Hence, it is necessary to transfer funds from your bank account (or some other brokerage account) into your brokerage account before placing a buy order.

Similarly, whenever you place a sell order, the money gets deposited into your brokerage account.

What can you do with a brokerage account?

You can utilize your brokerage account to access stocks and different kinds of ventures. You can undoubtedly purchase and sell stocks, shared assets, ETFs, and other different types of securities which will subsequently assist you with exploiting expected long term benefits too. It also helps you to set aside money for your investments.

Brokerage account Vs Demat account

Although brokerage accounts and demat accounts are fundamentally different in their nature, it may become confusing for a newbie to understand the exact difference between them. Here are some key differences between a brokerage account and an online demat account :

Brokerage Account Demat Account
  1. It is the place where you keep your money that you want to use for trading or investing purposes.
  1. It is the place where the dematerialized shares which you have bought are stored after settlement.
2.   All transactions happen immediately 2. There is a settlement period of T+2 days for shares to be delivered.
3. It is opened with the broker. 3. It is opened with depository (NSDL or CDSL in India)
4. It allows you to make transactions for selling/buying. 4. It can only store the shares once they are bought.

How to open a Brokerage account 

After knowing everything about what a brokerage account is, you are ready to know how to get your own brokerage account:

  1. Do your own research about different brokers and choose the one which suits your trading and investment needs and is within your budget.
  2. The next step will be to fill up an account opening form. You will be required to fill your personal details such as Name, DOB, gender, Address, etc.
  3. Submit the required documents such as PAN card, Aadhar card (for Indian residents), Identity proof, Passport size photographs, etc. for verification.
  4. Read the agreement and sign it to avoid any chances of discrepancy between you and your broker.
  5. Complete the KYC (Know Your Customer) process. It can be either In-person biometric verification or eKYC where you will be required to send your video according to your broker’s guidelines.
  6. Pay the account opening fees (if any).

All the above processes can be online or offline, depending upon your choice of broker. However, most people prefer using online services as they are quick and easy to use. Although the process of opening an online brokerage account is much more efficient than the offline process, in some cases the verification of your documents may take a few days. 

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