Choosing a Broker and opening Demat Accounts

Investment advisors- An introduction.

Hi there,

As an investment professional, I can confirm that most members of the public have roughly zero investment skill. This is not meant to be derogatory, just realistic. However, most members of the public also seem to think that investment is or should be ‘easy’ and as a skill has very little value added. If only it were so.

The reality is that most people have limited financial skills because these things take effort, study and thought. In our time away from an occupation, we want to relax, not analyse annual reports. But to be successful, we need to see a lot of annual reports before we find the one we really like. This is a real chore.

The ability to trade online through laptops and mobile phones has made share market even more available to investors and it has definitely expanded the number of trades being made, which brokers and stock exchanges  around the world must be grateful for; but all of these facilities has not made us better investors. As long as the investor does not have the required skills to flourish, he needs an investment advisor that offers research and guidance.

Should an investor with very limited funds be investing in the markets? If yes, what should his approach be? What should be the approach of an investor who has a huge chunk of money to invest? Should he hedge his investments in the derivatives market? If an investment is made that proves to be shockingly poor, and loses eighty or ninety percent of the money invested, it was a bad deal , right? If an advisor had pointed out just how risky the deal was, might the investment funds have been saved? Would that have been money better spent than saved? If an extra thirty or fifty rupees spent on advice from an investment advisor could have saved one thousand, might that not be an acceptable price to pay?

The above thoughts clearly bring into focus the need of an investment advisor.

More about investment advisors and portfolio management in our next lesson.


The Broker’s role in investing.

Hi there,

What should be the broker’s role in your investing decisions?

It would be better if you can limit your broker’s role to executing your orders .This is not to undermine their importance. But, i feel that’s where it should end. Because, your broker makes money through brokerage targets achieved through securities transactions. He does not make any money from setting up a long-term financial plan for you. Since a fee is charged whenever you buy or sell,the more you keep buying and selling – the more he makes money. Knowingly or otherwise, the broker/relationship managers will be more interested in generating the target brokerage. This is the reality. Your broker may NOT be required to act in your best interest and you may be receiving dangerous advice that could cost you a fortune.

Why? –Because, brokers don’t have fiduciary responsibility.

Most people using stock recommendations from brokers expect the broker to recommend appropriate investments so that it improves their portfolio’s performance. Underlying these expectations is the understanding that they will act in the best interest. The legal term for ‘acting in your best interest’ is called fiduciary responsibility. For instance, if you set up a trust for your child and name a trustee to oversee that trust, the trustee has a fiduciary responsibility to act in your child’s best interest. If they don’t, they can be taken to court and be held liable for their actions. A common misconception among investors is that their stockbroker has this fiduciary responsibility. They don’t. That’s why following their advice can be dangerous.

Want more proof? – read the fine prints.

How did you start your de-mat account? You just placed 32 odd signatures on that 60 page booklet. Isn’t it? Did you read that whole thing? Most probably- No. If you go through those paragraphs, you will realise that –You are solely responsible for all investment decisions and trades even if you have accepted the broker’s call.

Who gives you market tips? Your broker or analyst?

Here’s the reality- Most of the time, the guy who gives you market tips is the employer of the broker. They are given general ‘market tips’ every morning by the main broker which they blindly tell to all their customers- without considering the risk tolerance capacity, age, equity or profile of the customer. That’s the exact reason why there are more losers in the market. This is not to say that researches done by brokers are not good, but those are general advices.

Understand the difference between a broker and an analyst.

At this point, it is also very important to understand the difference in role between a broker and a stock market analyst. An analyst literally analyzes the stock market, and predicts what it will or will not do, or how specific stocks will perform. A stock broker is only there to follow your instructions to either buy or sell stock and not to analyze stocks. Broker’s target is to earn their money from commissions on sales. So when brokers themselves double up as investment advisors– there is some danger in it.


Being with the right broker is critical. It can mean making money for yourself with your trades, or end up you making money for the broker. Ideally, brokerage should assume importance only when they threaten to eat up a significant chunk of your profits. This would be a problem more relevant to day traders than the long-term investors, who, in comparison, might trade occasionally. High-volume traders can consider negotiating their commissions with brokers. Alternately, such traders can also consider flat fee broking products, which charge fixed brokerage for a specified period, irrespective of the frequency or value of transactions. This ensures a limited trading cost even as traders enjoy the broker’s services and advice. A good investor should be more concerned about the quality of tips and advices he takes, rather than negotiating on brokerages.

So, If you are seeking advice on balancing your portfolio, then you need to look for an investment advisor (sometimes called a financial planner), who will charge a fee for drawing up a total financial plan for you. The financial planner may work out a strategy to manage your securities holdings in harmony with your total financial plan.


How to choose a Stock broker?

hi there,

In this post, i would like to talk about some tips on choosing a broker.

Stock Brokers are registered members of stock exchange. Nobody except the stock brokers can directly buy and sell shares in Stock Market. An investor must contact a stock broker to trade stocks.For availing the service, the broker charges a fee called brokerage. It is generally a percentage of the value traded.

India has two big stock exchanges (Bombay Stock Exchange – BSE and National Stock Exchange – NSE) and few small exchanges like the Cochin Stock exchange. Investor can trade stocks in any of the stock exchange in India .

The best and practical way to choose a broker is to get referrals. You can find out from other people about the broker they use and why they have selected them, it is better to choose someone whom you have heard good things about.

Here are a few more tips from my experience:-


Some brokers are more geared for frequent traders and professionals. There are others that are geared more for beginners.  For most novice investors, it is much better to go with beginner-friendly brokers. High professional stock brokers will have a long list of high flying investors. While they’ll be busy attending their high profile investors, you a may not get the personal attention and advice that a newbie needs.


Most of them, I’ve seen, select a broker who offers to charge fewer commissions on trade. But, that’s not the criteria by which you select a broker. A broker should understand your preferences, your likes, your dislikes, your favored asset classes, your risk profile and they should be capable of giving you personalized tips based on that information. A stockbroker has to work with your goals in mind. Now, this doesn’t mean that you should totally ignore the commission part. You should definitely negotiate. Commissions charged should be reasonable.


Stockbrokers are service providers. They are in business to make you wealthy. Some stockbrokers feel that their business is to buy and sell stocks. For them, money making is just incidental. Whatever a stockbroker says to you, always remember you are the client. It is your money and you make the final decisions. If you feel uncomfortable about any investment proposition, tell your broker and they will respect your decision. If they go ahead and go against you, or compel you to buy shares of their choice, then you definitely have the wrong stockbroker.


Ask ‘market tips’ to any broker and he’ll immediately give a list of 5 or 6 ‘hot stocks’. Whenever you get such tips ask yourself – “Why is this tip worthy of my hard earned money?” A good stockbroker will make decisions based on your profile and then choose a stock. They should be able to explain to you in simple terms why they think that stock is a good choice for you. A broker will have to explain what the fundamentals are, about its market capitalization and PE, about its valuation and future prospects, about the degree of risk and the profit potential. The broker’s product knowledge is critical.  If they cannot explain their actions, drop them.


Check if the broker has any specialty or is a jack-of-all-trades. If a broker has special focus and strength and this agrees with your investment goals and aspiration, you will gain more working with him.


Some broking houses publish excellent research reports exclusively for it’s members.Ask your prospective broker to give copies of earlier research reports and see if the opinions expressed in those reports have some degree of accuracy. These research reports are useful guides to get useful insights.


Be sure to get opinion from investors about the quality of service that the broker provides.

that’s some tips from my side..

Bye for now ,

have a nice day !!


Who is a stock broker?


A stockbroker is an individual / organization who are specially given license to participate in the securities market on behalf of clients. The stockbroker has the role of an agent. When the Stockbroker acts as agent for the buyers and sellers of securities, a commission is charged for this service.

As an agent the stock broker is merely performing a service for the investor. This means that the broker will buy for the buyer and sell for the seller, each time making sure that the best price is obtained for the client.

An investor should regard the stockbroker as one who provides valuable service and information to assist in making the correct investment decision. They are adequately qualified to provide answers to a number of questions that the investor might need answers to and to assist in participating in the regional market.

  • Are they governed by any Rules and Regulations?

Of course, yes. Stock brokers are governed by SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956, Securities and Exchange Board of India [SEBI (Stock brokers and Sub brokers) Rules and Regulations, 1992], Rules, Regulations and Bye laws of stock exchange of which he is a member as well as various directives of SEBI and stock exchange issued from time to time. Every stock broker is required to be a member of a stock exchange as well as registered with SEBI. Examine the SEBI registration number and other relevant details can be found out from the registration certificate issued by SEBI.

  • How do I know whether a broker is registered or not?

Every broker displays  registration details on their website and on all the official documents. You can confirm the registration details on SEBI website. The SEBI website provides the details of all registered brokers. A broker’s registration number begins with the letters “INB” and that of a sub broker with the letters “INS”.

  • What are the documents to be signed with stock broker?

Before start of trading with a stock broker, you are required to furnish your details such as name, address, proof of address, etc. and execute a broker client agreement. You are also entitled to a document called ‘Risk Disclosure Document’, which would give you a fair idea about the risks associated with securities market. You need to go through all these documents carefully.


According to the BSE website – “Sub-broker” means any person not being a member of a Stock Exchange who acts on behalf of a member-broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such member-brokers.

All Sub-brokers are required to obtain a Certificate of Registration from SEBI without which they are not permitted to deal in securities. SEBI has directed that no broker shall deal with a person who is acting as a sub-broker unless he is registered with SEBI and it shall be the responsibility of the member-broker to ensure that his clients are not acting in the capacity of a sub-broker unless they are registered with SEBI as a sub-broker.

It is mandatory for member-brokers to enter into an agreement with all the sub-brokers. The agreement lays down the rights and responsibilities of member-brokers as well as sub-brokers.


There are a number of broking houses all over India. Many of them have International presence too. Following are some of the leading Stock Broking firms in India.

  • IndiaInfoline
  • ICICIdirect
  • Share khan
  • India bulls
  • Geojit Securities
  • HDFC
  • Reliance Money
  • Religare
  • Angel Broking

Investors have to check the broker’s terms and conditions and decide about opening a trading account. Only Govt. tax rates like, security transaction tax, stamp duty and service tax are uniform other charges like brokerage for delivery trades, intraday trades, minimum transaction charge, statement charges, DP charges, annual maintenance charges etc., may vary from one broker to another.