A demat account allows a person to hold his shares in a dematerialized (electronic) form. It should be linked to one's trading account so as to enable smooth transfer of shares when share trading is done.

Demat account services are offered by several banks, stock broking companies and financial institutions that provide DP (depository participant) services as well.

Since there are multiple players in the market, an investor should consider a few relevant factors before finalising, whose services he wants to go in for.

The factors that should guide in the selection of the right provider are as follows:

• Charges like account opening charge, annual maintenance charge, transaction fee, etc as they differ from provider to provider. Some providers might even waive off a few charges.

• Brokerage commissions: The lesser, the better it is!

• Service quality levels

• Transparency in dealings

• Stability & Usability

• The ease and time taken for transferring funds between the bank and demat account

• Customer care support

These accounts generally have a lot of hidden charges, which one may not be aware of. The investor thus needs to be wary of this.

Also, an investor needs to first determine his own requirements and then compare the different service providers based on the parameters indicated above.

His requirements depend upon which attributes he values the most. Also, it is directly dependent on what he actually intends to do in the stock market – Is he a trader or an investor, which products he wants to trade in, the amount he wants to use in each transaction, so on and so forth.

In our view, an investor who invests small amounts of money or who is a passive trader should opt for a 3-in-1 account provider, in order to get more structured and convenient option for trading.

A 3-in-1 account provider is one, who gives the facility of opening a savings account, a demat account and a trading account – all together!

Also, when choosing a bank as one's provider, it is recommended that the person should go for one in which he already has an account. This would do away with the hassle of opening an account with a new bank.

Author's Bio: 

Kotak Securities is one of India’s leading share broking firmoffering stock trading, mutual fund and IPO investing service’s along with a research division specializing in Sectoral research and Company Specific Equity Research.Express your views on their Facebook Page and Twitter Handle (@KotakSecurities) or you can also browse through their various videos on YouTube and Slide Share.