Discount brokers are a segment of stockbrokers that are emerging very fast in the industry. These companies are growing at a faster rate due to their low brokerage charges. This is the biggest USP of discount brokers.
This article is an overview of discount brokers. We will discuss who is a discount broker, what is his role, and what are the advantages and disadvantages of discount brokers.
What is a discount broker?
A discount broker is simply a brokerage firm that offers discount trading rates to investors. The brokers work at a discounted brokerage rate to offer their services to clients. Discount brokers are either individual entities or firms that carry out buy and sell orders for clients. However, they do not provide specific investment advice or other services. Thus discount brokers are best suited to investors who manage their own investments.
History of discount brokers in India
The concept of a discount broker started in 2010. However, it spread like an epidemic in the Indian stock market.
In recent times, there are many emerging discount brokers in India doing a good amount of business by attracting more and more traders. Some of the best discount brokers in India are Zerodha, 5Paisa, SAS Online, Samco Securities, Upstox, Wisdom Capital, etc.
Most of these discount brokers offer cheap brokerage plans and unlimited brokerage plans where they charge a fixed amount per month or annually and the customers can do unlimited trade. Due to these plans, they are also known as budget brokers or flat fee brokers.
Ever since the discount brokers were launched, a new segment of the population has started trading thus uplifting the entire ecosystem.
Products provided by discount brokers
Most discount brokers have registered membership with BSE, NSE, MCX, NCDEX, ACE, ICEX, MSEI, etc. They have various products for investment that they offer to customers like Equity, Debt, Currency, Commodities, Derivatives, Mutual Funds, IPOs, Insurance, Repository services, Forex, SIPs, Bonds & Debentures, etc.
Why open a Demat account and trading account with discount brokers?
A Demat account is like a savings account for shares. It safely holds your stocks or shares. Therefore opening a demat account is the first step before you start trading. A trading account on the other hand helps people trade with his or her shares using the broker’s trading platform. Most brokers will open a demat account and trading account for free or at a very nominal charge.
How to open a demat account with discount brokers?
* Decide which discount broker would you want to open your account with
* Fill the online form for demat account and trading account on the broker’s website
* Enter all the KYC information like name, email ID, phone number, address, occupation details, etc.
* Upload all your documents
* The broker’s office will contact you to confirm all the information. They will also explain the charges associated with the demat and trading account.
* Once the verification is complete, your demat and trading account will be activated and you will be provided with relevant details.
Advantages of discount brokers
The brokerage plans of discount brokers are very cost-effective as compared to a full-service broker
Their trading platforms and back-office tools help you seamlessly trade and keep track of all transactions and brokerages.
Since discount brokers do not sell products, you will never find them convincing you or pushing you to buy certain stocks
They provide a lot of self-learning and study material for improving stock market knowledge
Disadvantages of discount brokers
They do not provide guidance and expert tips to help you make investment decisions
Most discount brokers carry out all their activities over the internet and do not have a customer service or back-office team
Sometimes you might be also charged extra for services that are not mentioned earlier.
Discount brokers have become a rage in a very less span of years. They save on brokerage costs which helps you invest more money in stocks. Therefore, discount brokers are definitely the next-generation trading partners due to their low brokerage and breakthrough trading platforms.
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