From Zerodha to Sharekhan: A look at the different types of brokerage accounts

Pranati Deva
Updated: 13 Dec 2021, 12:01 PM IST
TL;DR.

Some say choices are the bane of capitalism. Well, arguing this is outside the mandate of this article, early. So we will do something better instead! We will explain to you how you can pick the best brokerage account for yourself.

A brokerage account helps you buy and sell shares in real time.

A brokerage account helps you buy and sell shares in real time.

If you are a new investor, the first thing you need is to open a brokerage account. This is one part of 3 accounts you will need altogether to start the process along with your Demat account and bank account.

A brokerage account helps you buy and sell shares in real-time. It also helps you understand the process and has a manager that could help you with your queries.

There are various different types of brokerage accounts each with a separate set of pros and cons one could choose from. However, if you are a first-time investor, it might be difficult for you to choose which one to go for.

Let's take a look at different types of accounts brokerages have to offer:

Discount brokerage account

This is one of the most commonly used brokerage accounts. These offer trading services but without any value additions like research reports. It is a do-it-yourself (DIY) account where you can use it to buy and sell shares on your own without any external help or assistance and hence lesser charges. If you are looking to learn the basics of investment, it is a good account to have since it will help you learn the markets yourself and if you already have extensive knowledge and don't need assistance, this could be a great fit as the fee for such an account is minimal.

Full-service account

This is the complete opposite of a discount account. In this, the brokerage provides a number of services like a portfolio manager, stock tips, research reports, among others to help you invest well. However, charges for this account are higher than that of a discount account due to the number of facilities provided. This is a good account for someone who does not have a lot of time available for trading as the portfolio manager can help suggest stocks to buy and sell. It will help a new investor learn better with more help.

Margin account

In this type of account, the brokerage firm lends you money to purchase stocks, however, the stocks already in your portfolio will be held as collateral till you pay the brokerage the money back.

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There are various different types of brokerage accounts each with a separate set of pros and cons one could choose from.

Commodity trading account

If you want to trade in commodities like crude oil, gold, wheat, etc you cannot just use your equity account for the same. You will have to open a separate commodity trading account as well as a commodity Demat account.

2-in-1 account

As mentioned earlier, one needs three accounts - bank, Demat and online brokerage for trading. Some brokerages offer 2-in-1 accounts which have a joint Demat and trading account. If you have not opened a Demat account separately, the brokerage does it for you, if you opt for this type of account. This will make buying/selling of shares and transferring them to your Demat easier.

3-in-1 account

This account further integrated all three - Demat, trading and bank account. It cuts extra steps like transferring money from your bank account to the brokerage, transferring shares to the Demat account. a number of banks and brokerages provide this kind of facility to make trading easier.

As seen above, there are a number of accounts that are offered by any online brokerage firm. However, one must research properly and opt for the account best suited for your needs.

First Published: 13 Dec 2021, 12:01 PM IST
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