Mutual Funds KYC - Know about How to do KYC for Mutual Funds

Mutual Funds KYC - Know about How to do KYC for Mutual Funds

How to do KYC for Mutual Funds

Recent media accounts reported that mutual fund industry now has over Rs. 23 trillion in Assets Under Management (AUM) in February 2019 alone. This could be considered to be a sign that an increasing number of people are taking financial planning earnestly and are setting distinct financial goals for their future.

With regards to secure investment schemes that provide above-average yields, mutual funds beat most other options to stand out as the emerging winner. Given the effortlessness through which one can invest in mutual funds, an upbeat market and a wide variety of mutual fund types make it an attractive investment proposition for new and seasoned investors alike. If you are looking to invest in mutual funds, first and foremost, it is essential to know that you can only invest in mutual funds if you are KYC compliant.

Understanding KYC for mutual funds

Know Your Customer, also known as KYC, enables financial institutions to validate your identity. As a first-time investor, you must undergo the KYC process before transacting in a mutual fund. Because it is a mandatory customer identification process, it is critical to submit your identity details to a mutual fund house, a stock broker like IndiaNivesh or any other financial institutions. This is because, according to the Prevention Of Money Laundering Act, 2002, AMCs must abide by the rules and guidelines established by the Act to implement a Customer Identification Proof.

Furthermore, there are specific requirements prescribed by SEBI concerning KYC norms of financial institutions and intermediaries to know their customers. KYC for mutual fund requirements are typically in the form of verifying the customer's identity and address, financial standing, occupation and vital demographic data. These rules and regulations are continually updated by SEBI periodically.

Valid from January 1, 2012, every investor regardless of the investment amount in mutual funds must comply with KYC to carry out any transaction. Since money laundering is a major issue worldwide, mandating KYC formalities is regarded as an efficient way of preventing illegal activity.

The chief objective of the KYC process is to ensure that a real person or individuals are making investments rather than fictitious names. Every mutual fund investor must adhere to the KYC procedure via a KYC Registration Agency (KRA). This information held by the agency is stored in a single repository for all fund houses and intermediaries to access. Examples of these agencies include NSE, CAMS and KDMS.

Documents required for KYC

To initiate your KYC process, you must submit the following documents along with the KYC application form and passport size photograph. Documents include:
• Identity proof such as driving license, passport copy, voter ID, Aadhar card, bank photo passbook, or PAN card
• Address proof such as recent landline or mobile phone, passport copy, electricity bill copy, voter ID, driving license or Aadhar card

Types of KYC procedures

Typically, you can complete the mutual fund kyc form either through the off-line or online method. CDSL Ventures Ltd has been nominated and authorised by the mutual fund industry to conduct the Know Your Customer procedure.

Off-line method

• Visit the CDSL Ventures website and download the KYC application form
• Fill in the details
• Submit the signed application form through the specified mutual fund authorities or intermediaries
• Provide identity proof and address proof and the passport size photograph to go along with KYC form
• The duly filled form can be physically submitted at any of the following places. These include the Asset Management Company (AMC) through which you are making the investment or the Registered Transfer Agent  (RTA) such as CAMS.

Online Method

• Create an individual account on the official website of the KRA. Fill in your credentials to initiate the online kyc for mutual fund
• Key in your registered mobile number and enter your Aadhar card number
• Verify the details through the OTP sent on your registered mobile number
• Upload a self-attested copy of your e-Adhaar
• Accept the consent declaration terms for the eKYC

Aadhar based KYC through biometrics

You can also opt for Aadhar based KYC if you have the Aadhar card. Request the fund house or agency to send their representative or an official to visit you personally and collect the details from you in person. You can submit a copy of your Aadhar card to the representative, and they will enter your biometric information on the scanner and link it to the Aadhar data repository. As your fingerprints get matched to the database, your credentials stored with the Aadhar database will reveal that your KYC has been validated. This process can ensure that you can go ahead with your mutual fund investment.

KYC for non-individuals

However, if the investor is not an individual, the KYC process must be completed in a different manner. For instance, here are some cases on how to complete the KYC based on the following:

• Joint applicants. All or both applicants in a joint applicant setting must complete the KYC individually.
• Power of attorney. The power of attorney holder and investor must complete the KYC process individually.
• NRIs/PIOs. All NRIs and PIOs must complete the KYC formalities individually.
• Minors. If a mutual fund investment is being made on behalf of a minor, the parent or legal guardian who wishes to operate the account on behalf of the minor must complete the KYC procedure. When the underage individual attains adulthood, he or she must complete the KYC formalities at the time.
It is important to note that if any KYC documents are found incorrect, insufficient or not in order, the investor's compliance status can get cancelled. Under such a situation, the investor is informed of the status by the relevant authority.

To know your mutual fund kyc status and the progress of your KYC process, you can check on the following websites. Here, it is important to note that you can visit any of the below sites depending on where you have given the KYC application form:

• CDSL Ventures Ltd. CVL -
• NSE (DotEx International) -
• NSDL Database Management Ltd (NDML) -
• CAMS -
• Karvy -

To know more about your mf kyc status, you can visit any of the above sites and enter your PAN number.

On completing the KYC procedure successfully, you will be able to purchase mutual fund units from your respective AMC or RTA. You can freely invest in a wide variety of mutual funds of your choice and any amount, after completing your KYC formalities.


Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.


Buy IPO - Know How to Buy an IPO Online

An IPO or Initial Public Offering is a process that companies use to raise capital from the general public. In this, the company offers its shares in exchange for the funds invested by the public. These shares can be subsequently traded in the market.In short, it is a way through which a privately held company can get itself listed on the exchange and reach out to the public for its capital requirement by sale of its shares.Points to note when applying for an IPO• When one makes an application to buy an IPO, it is merely an invitation. It should not be confused with an offer. Only when the IPO issuing company offers the shares in exchange for money, does it amount to an offer. • Types of IPOThere are two kinds of Initial Public Offerings – Fixed Price and Book Built. In the case of a Fixed Price IPO, the issuing company determines the IPO price (sum of the par value and premium amount) in advance. Interested investors can buy the IPO only at the pre-determined price. In the case of a Book Built IPO, the issuer only announces an indicative range. The IPO's final price is decided through the process of book building. Generally, most of the IPOs these days are conducted through the Book Building issue process. • Classes of IPOsIPOs typically are categorized into three classes – Retail, High Network Individuals (HNIs) and Institutional. Investments till the value of Rs. 2 Lakhs are classified as retail. Who is eligible to buy an IPO?Any adult (someone who is at least 18 years of age) who is considered competent to enter a legal contract is qualified to buy during the IPO. The concerned person should have the following documents and accounts:• Valid PAN Card issued by the IT Department• Active Demat account (In case of an IPO, it is not necessary to have a trading account. A Demat account can suffice for this purpose. However, if the investor wants to sell the stock upon listing, then a trading account is required)Modes of investing in IPOEarlier when one wanted to invest in an IPO, he or she would need to reach out to a broker. The broker would provide a physical copy of the application form. The investor would need to fill it and submit the same along with the cheque for payment. The application money would get deducted from the investor’s account and balance (if any) post allocation would be refunded back. It was observed that this process was time-consuming and cumbersome. Hence, a need was felt to move to a more efficient model for investing in an IPO.ASBA – Applications supported by Blocked AmountASBA was designed as the answer to the issues faced during offline IPO applications. It is a process conceptualized and created by SEBI to streamline the online IPO process. With the help of ASBA, one can buy an IPO online without releasing the funds until the time the shares are allocated to them.This application provides an authorization to block the application money in the bank account, for subscribing to an issue. If an investor uses the ASBA feature, the application money is debited from the bank account only if the application is successfully selected for allotment. During the interim period (i.e. till the time the shares are allotted) one can earn interest on the blocked amount. This benefit is applicable if the money is held in an interest-bearing account.Considering the reach and ease of this application, Securities and Exchange Board of India (SEBI) made it compulsory for all IPO investors (for a public issue) to go through ASBA. This change has been in effect since Jan 2016. Some key advantages of ASBA are:• Investors do not need to pay the IPO application money through a cheque or other such facility• It eradicates the long-drawn process of refund of the money (the difference between application amount and actual allotment) by the IPO issuer.• It enables the investors to give authorization for the transfer of application money in the IPO application form itself. This ensures that the investors do not suffer from interest loss in the interim period.• Simpler application form• The IPO investor needs to deal only with a known intermediary such as their bank.Who can apply through ASBAIndividual investors who meet the following criteria can buy IPO (book building route) through ASBA:• He or she falls under the category of Resident Retail investor (is applying for securities whose value does not exceed Rs. One Lakh)• The bidding is being done at the cut-off value with a single option regarding the number of securities being bid for.• The funds being blocked for buying the IPO are held in an account with a Self-Certified Syndicate Bank (SCSB)• Has decided not to revise the bid value• The bidding is not being done through any reserved categoryHow to buy an IPO Online through the ASBA feature?The process to buy IPO online is extremely simple and hassle-free. One needs to follow the below-mentioned steps:• Log onto the online banking portal or net-banking account• Go to the section dealing with investments. There will be an option for buying an IPO or e-IPO. Click on that.• Fill in the required details such as depository information, bank account number, etc. and complete the process of verification.• Once the required information has been entered, the investor is led to a screen usually titled as “Invest in IPO” or something on the same lines.• Select the desired IPO. In a book building IPO, one needs to mention the bid price in addition to the number of shares• Read properly the “Terms and Conditions” of the IPO and accept the same for the next steps• If everything is in order, then confirm the bid by clicking on “Apply Now”Note: The list of the ASBA certified banks or partners is available on the website of NSE or BSE.With these technological advancements, it has become very easy to invest in an IPO. To make the process even better, one can reach out to financial experts such as IndiaNivesh. IndiaNivesh offers a wide range of financial services related to broking and distribution, institutional equities, strategic investments, corporate advisory as well as wealth management. Their research team studies the markets continuously and also lists out the top-performing IPOs for the benefit of the investors. All details are available at Final WordSo next time you see an interesting IPO coming up, you can buy the IPO online from the comfort of your home. In case IPOs are something that you would like to consider in the future, then we suggest you save or bookmark our tips on how to purchase IPO online. It will save you time in the future. And we all know that time is money! Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Tax Saving - Know How to save tax using Demat Account

There is a popular joke that one can teach their children about taxes by eating one-third of their ice cream. No one likes to pay more tax than they need to. As a result, everyone is on the lookout for ways to reduce or save tax outflows. If you mention the words “how to save tax" in a gathering, you are sure to get the attention of every person around you!In this article, we will share some income tax-saving tips and tricks with the help of your Demat account.What is a Demat account?A Demat or dematerialized account is used to hold shares, securities, bonds and mutual funds in an electronic format. The objective behind this account is to move away from maintaining physical copies or documents for shares or stocks and store them safely in a digital platform. It simplifies and expedites the trading process. One can access all their share certificates at the click of a button.A Demat account is principally similar to a bank passbook. Though it offers a wider range of benefits. When you make any deposits or withdrawals from your bank account, the credit and debit entries are made in your passbook. Similarly, when you buy or sell any shares, etc. it is credited to or debited from the Demat account. According to the SEBI guidelines passed in 1996, to invest in the stock market, one needs to mandatorily have a Demat account. How to save tax using a Demat account?Now you must be wondering how to save tax by using your Demat account. We will solve the mystery for you. There are three ways to save tax through a Demat account.1. Dividend Listed companies distribute a part of their earned profits amongst their shareholders in the form of a dividend. The dividend percentage is at the discretion of the company’s management. When companies pay a dividend, it is directly transferred to the shareholder’s Demat account. This arrangement can help with tax savings. In the case of a Demat account, tax is levied only for trading transactions i.e. which involve purchasing or selling shares. Dividend income does not fall under the ambit of tax calculations. Hence, this dividend income can be used by investors as an additional source of income. So, your share ownership has dual benefits – you enjoy dividend earnings from time to time and also save on tax outflows. 2. Capital Gains • Short-term capital gains (STCG): Any capital gains earned by selling off the shares within the holding period are called short-term capital gains. On the other hand, if the sale transaction is done after the completion of the holding period, the gains get classified as long-term capital gains. Long-term capital gains are not taxable until the value of Rs. One Lakh. Many investors make use of this provision to save on their tax outflows and earn higher net income (total gains minus taxes). So, you can store your shares safely in the Demat account for a longer period and benefit from the tax exemption available on long-term capital gains.• Short-term capital loss (STCL): Usually when you hear the word losses, you can only think of negative things. But there is a way that you can leverage your short-term capital losses to offset or adjust the tax payable on capital gains made in the short-term. So, if you have a Demat account, you can save the tax payable on short-term capital gains by balancing it against the losses incurred (short-term) across any asset class. Additionally, one can also carry forward short-term capital loss (to set-off the short-term capital gains) for eight years. The only pre-requisite is that the loss and gain need to be from the same category of assets.• Long-Term Capital Gains (LTCG) – Earlier, LTCG did not attract any tax obligations. However, with the recent changes, gains of this nature are taxed at 10%, if their value exceeds the limit of one lakh. Still, a Demat account holder can save taxes if their long-term capital gains are less than Rs. One Lakh. • Long-Term Capital Loss (LTCL) –Sometimes, even the fruits of patience are not sweet. Despite remaining invested for a long period, some assets or investments do not yield a positive return and we end up with long-term capital losses. However, just like STCL, one can use their long-term capital losses to offset or adjust the taxes payable due to long-term capital gains.This arrangement helps the Demat account holder to bring down some of their tax obligations. 3. Equity Linked Saving Scheme (ELSS): ELSS is best explained with the saying – “killing two birds with one arrow”. ELSS is a type of mutual fund which offers a twin set of benefits to the investors. In addition to the potential of wealth creation and appreciation, in the long run, they also offer tax savings. Investments till Rs. 1.5 Lakh in ELSS qualifies for tax deductions as per Section 80C of the IT Act. So, a Demat account holder can choose to invest in ELSS Mutual Funds and save taxes easily. Compared to other tax-saving tools available currently in the market, ELSS Mutual Funds offers more (or better) benefits. With a shorter lock-in period of three years and the potential of higher returns, they are becoming a preferred choice for many investors. Additionally, it enables novices or first-time investors to make an entry into the world of equity investing.How to open a Demat account?Opening a Demat account is an extremely simple and hassle-free process. One can select any Depository Participant (who is authorized by SEBI). The KYC paperwork requires only basic documents (PAN Card, Aadhar Card, details of residence, income proof) and a photograph of the applicant. While the investor opens the Demat account with the chosen DP, the actual shares are maintained in safe custody by either one of the national depositories i.e. NDSL or CSDL. These institutions are sponsored by government-owned bodies. Hence, one can be assured that their shares are safe in the Demat account. Choosing the right brokerage firm can make the process even more simple and quick. IndiaNivesh, a trusted name in the Indian financial market can become your investment expert in this. Indianivesh has been offering a wide range of financial solutions in the areas of broking, mutual funds, equities, IPO, insurance and wealth management for the last eleven years. Their technological expertise combined with in-depth market knowledge has helped numerous clients to grow and create wealth. Final Thoughts:A smart investor does not stop with merely earning. It is equally important to create wealth and maximize your return by finding out ways to save taxes or other outflows. If you have a Demat account, ensure that you make use of it optimally. It can be a great help not only in trading but also in saving tax outflows. Now that you know these great income tax-saving tips, you can ensure you get the best out of your hard-earned money. Especially with a partner like Indianivesh.And if you know someone who is wondering how to save tax, make sure to share this article with them. After all, sharing is caring!     Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • What is NCD (Non Convertible Debentures)? – Meaning & Features| IndiaNivesh

    What is NCD (Non Convertible Debentures) Investors are continually looking for new investment avenues, especially in a market where conventional investment instruments and sometimes falter in a volatile market. One such attractive proposition that can help you manage liquidity and risks while offering significant profits are nonconvertible debentures (NCDs).What is NCD?Nonconvertible debentures meaning, NCDs are financial vehicles issued by reputed companies for a specified period of time with a guarantee of a fixed interest to investors. Unlike standard debentures, nonconvertible debentures cannot be transformed into equities or company shares. The company that issues the NCD decides on the interest rates. On maturity, investors receive the principal amount and the interest together. Nonconvertible debentures can be held by individual investors, banking institutions, primary dealers, unincorporated establishments, registered corporate bodies and other bodies incorporated in India. Companies issuing upcoming non convertible debentures in the market, do so to raise funds from the public. These NCDs can be secured or unsecured. Secured nonconvertible debentures are supported by the issuing company's assets to accomplish the debt responsibility. Hence, if the company fails to pay its investors, they can claim the payment by liquidating the company's assets. On the other hand, unsecured NCDs are ones that are not supported by the company's assets. Thus they hold far higher risk than secured NCDs.Features of nonconvertible debentures:Interest rates Typically, the interest rate of NCDs overs between 10 to 12%. Fixed deposits on the other hands could offer a maximum of 8% returns. Hence, compared to most investment options, NCDs can be lucrative due to its high-interest rates. However, how credit rating agencies grade a company’s NCD can be inversely proportional to the interest, it provides. For instance, a highly rated NCD could provide low-interest rates. But compared to corporate fixed deposits, bank fixed deposits and government bonds that give a maximum of 8% returns; nonconvertible debentures offer returns up to 11%, which makes it an attractive investment instrument.Pay out options If you are looking to invest in nonconvertible debentures, you can benefit from a variety of interest pay out options such as on a monthly basis, quarterly, six-monthly or annual basis. Typically, NCDs could mature from 90 days to 20 years. Hence, you have the opportunity and flexibility of choosing short and long-term tenures depending on your investment objectives.Liquidity Non convertible debentures are listed on stock exchanges and offer secure withdrawal options. Redeeming your investment from NCDs can be easier than bank fixed deposits, and hence, can be considered as providing better liquidity than FDs.IssuanceA company that offers nonconvertible debentures through open issues can be purchased within a specified timeframe. Similarly, NCDs can also be purchased from the stock market. To understand what is ncd in stock market, you may want to look into the open stock market and exchanges for easily tradable NCD options.Stringent credit ratingNCDs are only authorised to be issued by companies that have good credit ratings. Credit rating agencies rate NCDs and revise ratings regularly.Things to consider before investing in non convertible debenturesIt is critical to understand how NCDs can be vulnerable to risks. These risks could be related to how a company's business is handled and how it utilises its funds. An NCD’s credit rating could take a hit if the company's turnover is impacted negatively. To address the impact, companies then borrow additional funds from banks and lending institutions. This is why it is critical to consider a few points before investing in nonconvertible debentures. These include:Issuer's credit ratingOpt for a company that has a credit rating of AA and above. The score is a crucial indicator of the company's potential to raise funds from external and internal operations. The rating is also evidence of the company’s sustainability. Credit rating is a valid parameter that can expose the financial position of the company.Debt levelsIt is essential that you conduct background checks on the asset quality of the organisation if you are considering to invest in its nonconvertible debentures. If a company is allocating more than 50% of its entire assets in unsecured loans, it can be a sign to stay away from such companies.Understanding CARCapital Adequacy Ratio or CAR looks into the company's capital and calculates if it has adequate funding to outlive potential losses. It can be an excellent idea to look into the company you plan on investing to see if it has at least 15% CAR. Alternately, you must also ensure that the company has historically maintained the CAR over a period of time.Looking to NPAsA company issuing NCDs must set aside at least 50% of their assets towards Non-Performing Assets or NPAs. This can be an optimistic indicator of the company's asset quality. In the event that the company's quality declines due to bad debts, you may want to take it as a warning.Gauging ICRA company's ability to settle the interest on any of its debts at any given time can be witnessed in its Interest Coverage Ratio or ICR. The ICR of a company reveals how it can handle potential non-payments.Tax bracketIf you belong in the 10% and 20% tax plan, you may find nonconvertible debentures as a lucrative investment option. This is because, if your tax bracket is low you stand to earn more from NCDs.ConclusionThere is a marked difference between fixed deposits and non convertible debentures. It can be an excellent idea to look into specific factors before selecting an NCD as an investment option. Consider the company's financial health and how it employs its funds if you notice a diversion from its core business; it can be a sign to stay away from the said company. Going through the credit rating of companies can also give you a fair idea of how your investment is secured. For instance, you may want to steer clear from companies that have low ratings but temptingly attractive, high returns. Such propositions could be risky in the long run, especially if the overall financial health of the company is not stable.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • What is Intraday Trading?

    What is Intraday Trading and How to Do It?Stock market offers numerous opportunities to traders. In fact, it is one of the daily sources of income for many people. The reason why stock market trading is popular is because it has potential to generate enormous wealth. Moreover, with the right trading strategy in place, the sky is the limit for making profits. In this article, we will learn about intraday trading meaning and its related concept.Let us first learn about what is intraday trading.What is Intraday Trading?Intraday trading or day trading is buying and selling the stocks or securities on the same day. To put it in simple words, intraday trading is squaring off the transaction on the same day it takes place. The main objective of the trader in intraday trading is to book profits on the same day and not carry any overnight position in the market.As you are now very well aware of the intraday meaning. Let us read about some tips that would help you in becoming a successful intraday trader. The tips for Intraday Trading are as follows;Intraday Trading Tips• Trade in Liquid StockSince intraday trading involves squaring off the transaction on the same day, trading in liquid stocks is recommended. Liquid stocks means the stocks that have higher volume and one can easily find buyers and sellers for these stocks. Intraday trade can be settled only when there are sufficient buyers or sellers to purchase or sell a stock. This is possible only when the trading volume is high in stock. • Follow the NewsAnother important intraday trading tip is following the news regarding stocks. Stocks which are in news are often the most volatile. Intraday traders want to trade in volatile stocks due to big price movement which gives them immense opportunities. Also it is easy to predict the price movement of the stocks that have news inflow. A positive news brings the price up whereas a negative news brings the price down. • Technical ChartsTrading on the basis of technical chart reading is always the best. Charts help in predicting the future price movement. The different patterns on the chart suggest the possible future movement in the stock price. Technical chart reading is possible only after good training. If you want to trade in stocks on the basis of chart reading, you can open a demat account with IndiaNivesh. • Prepare a Trading ListTrading in a particular script or stock gives you a better hold of those stocks. You are able to easily predict the price movement in those stocks and trade accordingly. One can prepare a trading list after detailed analysis and in-depth study of the stocks. • Resistance LevelsAnother important intraday trading tip is trading as per the resistance levels of the stocks. The resistance levels of the stocks is that level beyond which the stock does not move. A trader keeps a watch on the resistance levels of the stock and then takes a trade. When the stock breaks the resistance levels, the trader quickly takes a position in that stock and grabs the advantage of sudden price movement. • Top Gainers and Top LosersTop gaining and losing stocks of the day offer immense opportunity to traders to trade in them and make a good profit. However, the selection of stocks for trading must be done carefully. Blindly following the list of top gainers or losers for intraday trading can lead to heavy losses and wipe out your capital. • Weekly Movement of StocksThe traders often trade in stocks after seeing their weekly price movement. They take the position in the stocks after studying the weekly close of the stock price. A detailed analysis of stocks suggests which stocks are suitable for intraday trading. As you are now aware of the tips for intraday, let us have a look at how to do intraday trading.How To Do Intraday TradingThe first and foremost requirement for Intraday Trading is to open a trading and demat account. The demat account can be opened with any broker who provides these services. Selection of a broker must be done by comparing the brokerage rates and services offered by the different brokers in the market. IndiaNivesh is one such broker that provides hassle-free services at competitive rates. After opening the demat account, the beginners in the stock market must know when they can execute intraday trades and the timings of the market. Timings of the Stock MarketThe stock market in India is open from Monday to Friday. Saturday and Sunday are holidays. The stock markets opens at 9 a.m. and closes at 3.30 p.m. The intraday traders can take positions in the stocks during the above-mentioned time period. It is recommended by the experts to avoid taking any trade position during the first trading hour of the market as during that time the stock market is volatile and taking an intraday position can be a risky strategy.Let us now have a look at the benefits of intraday trading.Benefits of Intraday Trading There is no risk of taking overnight positions in intraday trading. Any adverse event after the closure of the market does not affect the intraday trader. In intraday trading, traders have higher margin in comparison to the investors. The potential of Intraday Trading to generate returns is very high. If right trades are taken, an individual can make fortune out of intraday trading. The brokers often give a discount to the intraday traders and charge lesser brokerage. The goal of the Intraday Trading is to generate higher profits. If you are a beginner in the stock market, you can start intraday trading with lower amounts initially. And when you are well equipped, you can slowly increase the trading amount. All you need to do is trade in the right stock and understand the correct entry and exit points of the stock.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • Know the difference between Demat Account and Trading Account

    If one wishes to invest or trade in the stock market, there are two types of accounts that need to be opened. These accounts are demat and trading account. These two accounts are different in their uses but both are necessary for investing in the stock market. What is trading account? In earlier times, trades used to take place between brokers who acted on behalf of their clients. These trades used to happen on an open floor and brokers used to call out the prices of their orders. When two brokers found the right price for their orders, they would transfer the share certificates and the funds and the transaction would get complete. With the digital revolution and online trading, the open outcry method for transacting has become completely obsolete. With all the stock exchanges going completely online, these manual trades by brokers has been replaced by online trading through the trading account. Read more about online share trading here. The trading account is an account used to purchase and sell – 1. Equity shares2. Equity, Debt and Hybrid mutual funds3. Bonds4. Government securities5. Derivatives6. Commodities7. Currencies8. ETFs9. Other instruments traded on the stock exchange Using a trading account to buy and sell is extremely simple. Each broker offers their own trading system through their website or mobile application. These trading systems are connected to the stock market’s proprietary online systems. This offers a price matching system. An investor or trader just has to put in his order request and when the system matches the price and quantity for the order, the order gets executed. This order matching system provides seamless execution of transactions without any human intervention. The trading account is basically a link between your demat account and the exchange’s order matching system. Once the trades get cleared at the exchange, the shares or other instruments are debited and credited from the respective demat accounts. The trading account makes it extremely simple to buy and sell any investment. Since most of the investments are listed on the exchange, price discovery is easy and transparent. All you need to do is select the instrument you want to purchase and the price, and the exchange’s order matching system will ensure the transaction goes through. Brokers charge brokerage for transactions executed through the trading account. Along with that, there are exchange fees and securities transaction tax that is levied on each transaction. What is demat account? A demat account is an electronic record or repository of the financial instruments owned by an investor or trader. It shows the different investments made, the date of purchase, the price at which it was purchased and the current market price. This account allows the investor to hold shares and securities in an online form. Physical securities held by a person can be dematerialised into their electronic form and held in the demat account. One of the primary advantage of a demat account is that your shares are safe. Shares in their physical form can get damaged or lost. But shares in your demat account are safe and you don’t need to fear losing them. A demat account, like any other account, lets you easily scan all the transactions. A demat account will show the current market value of all investments held in that account as on a particular date. It also shows whether a share is partly paid up or fully paid up, thus providing clarity to the investor. However, unlike a bank account, a demat account can have zero shares or securities and still be functional. A demat account is a very convenient way to handle all investments. Unlike earlier times where all securities were in physical form, a demat account holds everything in electronic form. This makes it very convenient to handle and operate. A demat account offers all facilities like a normal bank account such as nomination facility, joint accounts, change in name and address etc. A bank account is usually linked to a demat account, which makes it easy for dividends and interest to get credited to the investor’s account directly. Read more about a Demat account here. Trading account vs demat account The difference between trading account and demat account is simple, a demat account is an online account for storing shares and securities. A trading account is an account for purchases and sales of investments. A trading account inherently has no balance. It draws from the demat account once the purchase or sale transaction has gone through from the exchange’s side. A trading account also cannot exist in isolation. It has to be linked to a demat account from which the required shares or securities can be debited or credited. A demat account can exist without having a trading account. An investor can just invest in IPOs or Mutual Funds through a broker and hold these units in his demat account. However, to sell these units, a trading account will be needed. The difference between demat and trading account is very fine. However, it is essential to know how these two accounts operate and what their nature is. This understanding will help you open these accounts and get started with your investments. How to open a trading account: 1. Select a broker of your choice like IndiaNivesh Securities Ltd. Bear in mind that each transaction requires a certain brokerage so be sure to research about the different brokerage rates for both delivery based trades and intraday trades. 2. Check the services offered by each broker. Make sure you choose a broker who provides extensive customer support, especially if you are a beginner. A good broker who provides detailed research reports could be the difference between earning profits and earning wealth. 3. Fill in the account opening form and provide the mandatory KYC details. If you have a demat account with the same broker, the KYC details may be exempted, but that depends on the broker. Some of the KYC documents required are:a. Identity proof (Aadhar Card, Passport, Voter ID, Driving License, PAN card)b. Address proof (Aadhar Card, Passport, Voter Id, Driving License, Electricity bill, Gas bill, Telephone bill, Rental agreement, Loan agreement)You will need to submit a proof of income i.e bank statements, income tax returns, Form 16 etc. 4. You will also need to submit passport size photographs. 5. Some brokers request a verification check and witnesses while filling up the account opening form6. Once the broker processes your application, you will get details about your trading account7. You also need to link your bank account to your trading account so that funds received from a sale can be credited into the bank account. 8. Once you receive these details, you can start trading. However, before you execute any trades, you must know where you are investing and what your investment strategy is. Without knowing this, it is very easy to lose money in the stock market, especially while engaging in intraday trades which is susceptible to price fluctuations. Now that you know the difference between these accounts, why not open a demat and trading account with a reputed broker like IndiaNivesh Securities Ltd.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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