Doubt regarding brokerage?

I was thinking whether to go for Motilal Oswal or Angel Broking and came across the following:

What exactly does brokerage paid upfront mean? And which broker would you suggest for me? I'm looking to buy an ETF for long term. I don't want to do intra-day trading or margin trading. Also, if I'm looking to buy a Gold ETF, should I opt for commodities or not?

Also, one of my friends suggested that it's better to go for Demat account with a normal bank because they have branches everywhere. I could go for ICICI as I already have an account with them...

Please advice.

Dejavu,

Brokerage is an important criteria, as you are paying a % of your buying/selling to brokers just to felicitate a trade. However the quality of broker is just as important. Angel/Motilal Oswal are reputed broking house. And as such, Angel broking is offering you a cheaper rate. You can bargain with either broker to still get the brokerage down. Ideally .02% is fine, if you are not looking for a discount broker (who will offer you 20 rupees flat per trade) So it all depends upon the volume of your business.

Demat with a bank may cost you higher. Suggest you check for the charges with your broker and then compare cost/benefit.

Upfront brokerage is the minimal brokerage you have to pay, generally per year. And finally, if you are new to investing, and don't follow charts/news and fundamentals - avoid commodities.

Just my view.

Thank you for your reply. Is the upfront brokerage same as the annual maintenance charge? Can you give me a numerical example to understand this?

And I just wanted to know if Gold ETF will be classified as a commodity?

Dejavu,

Cannot say that the broker will not charge AMC beyond minimum brokerage. So ask this question to your broker, and depending who your broker is and the volume of business, you may get different answers or may be able to get it waived off.

Gold ETF is ofcourse a commodity play.

I was just looking at Zedhora at www.comparebrokerages.in and saw that it is written that for Zerodha, accounting opening charges for Trading account only is Rs. 300 and for Trading and Demat account is Rs. 600.

In which case would an investor go for opening of only trading account?

First you have to decide whether you want to trade or invest (I assume you know the difference). From your above context, looks like you are just a long term investor.

So, don't go for zerodha, they are discount brokerage suited for day traders/swing traders. Advantage - low brokerage. Disadvantage - No good support for investor/no own demat service therefore you cnt invest there etc. This is pretty much the case with all the discount brokrage.. few of them are Zerodha, RKSV etc etc.


For investor, you can go with Sharekhan. Has good support/has demat. Similar in line are Angel broking (though I dnt know personally). Advantage - Good back office/support, you can invest in equity, commodity, ETF, MF etc. Disadvantage - Brokerage is high (but this shouldn't affect you since you are investing long time and wont be doing frequent transactions.


What is upfront brokerage - Itz' liks prepaid card. lets say @ 0.05% of brokerage comes to about 2000/month for you.. they will have plans like if you take ABC plan then you have to pay only 1000 upfront and you can trade up to a certain number of transaction in dt particular month.


Hope it clarifies.. !!

Thank you for your reply.

Why do you say that Zerodha doesn't have Demat? Do they provide demat via a third party?

Yes I'm mainly interested in long term trading. I met angel broking yesterday and found out about their ₹30 minimum brokerage for trades. I'll be meeting kotak securities today and maybe ICICI and Motilal Oswal next week. I'll let you know how it goes.

Yes.. right !!

Don't buy any pre-paid brokerage plan from anyone. That's only for high frequency traders (that too in the days before discount brokerages started).

Use brokerage calculator in Zerodha/RKSV web site and compare with what others are charging. Post the comparison here.