5 Factors to Look at While Selecting a Stockbroker

5 Factors to Look at While Selecting a Stockbroker
01/10/2019

Today, there is an abundance of stockbrokers offering their premium services to individuals wanting to accumulate wealth through the financial markets. As such, it is vital to choose a good stockbroker who understands the investor’s financial goals and guides him/her towards substantial returns.

Investors of today have two choices when it comes to stockbrokers: the traditional stockbroker and the discount brokerages. Traditional brokers charge a certain percentage as a fee, which differs with the type and size of the transaction. These brokers also send out trading tips and research bytes to the clients.

Discount brokerages, on the other hand, offer the standard services but at a fixed (flat) cost, i.e. regardless of the type and size of the transaction. They, however, do not offer any trading expertise, i.e. they do not give out trading or stock tips nor do they provide any insights into a trade. As such, they are suitable for those who prefer to self-educate themselves and take independent decisions.

Considering these, an investor has to carefully think about his/her requirements as well as exercise caution when choosing a stockbroker.

Here are five factors that would help a new investor in selecting a stockbroker who understands the financial goals of the investor.

  1. Credibility

    It is vital to perform a thorough background check on the stockbroker before entrusting them with your life savings. Finding out how many years the stockbroker has been in business, how it has performed in the past, what do the clients say about the firm, and any other relevant questions. This will help the individual to know more about the broker.

  2. Minimum Balance

    Investors need to maintain a minimum balance in their stockbroking account, and hence, it is vital to inquire about the same. This amount varies from broker to broker, hence, investors should choose a broker who not only provides the best services, but also has a low minimum amount threshold so that it does not tax their monthly budget. Other than the minimum amount, there should also be ease of access when it comes to depositing and withdrawing funds. Typically, brokerage houses have tie-ups with local banks which lets investors access their funds at any time. Withdrawals normally take three days to reach the client’s account.

  3. Technological Expertise

    Brokers who constantly update their platforms with the latest technology are able to give a unique advantage to the investor. There are also able to match the evolving needs of the investors and educate them on new features and solutions. Choosing a broker who consistently provides a stable and steady platform to their clients is a must.

  4. Availability

    A broker should be available during stock market hours to execute orders without any lag or delay or to address any issues that may arise on their electronic platforms. An investor should also check the speed and the stability of the website/mobile applications, especially during peak hours, to ensure that the pages load quickly and easily as even a split second can lead to the investor losing out on a profitable trade.

  5. Transparency and Capability

Transparency and capability are also important parameters when looking for the perfect stockbroker. There are many ways in which brokers charge their clients. Hence, the client has to ensure that all charges involved are mentioned in a lucid and transparent manner while opening an account. This will help you avoid any hidden costs that brokers might impose later. Apart from this, a broker should also have strong business policies that maintain the quality of the business.

When it comes to the capability of the brokers, investors should make sure that the stockbroker and his team have a strong background and passion for trading in order to have a hassle-free experience. When the team is able, it largely influences the business practices and delivers a profitable outcome to its investors.

Choosing the right stockbroker is vital to trading as the investor is entrusting their life savings into the former’s care. If a stockbroker or his brokerage satisfies the above-mentioned criteria as well as provides real-time customer support, add-on financial services and, as a bonus, is interested in enhancing the client’s knowledge of the markets, then engaging with them is a wise decision.

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Do’s and Don’ts of Stock Market Investing for Beginners

Do's and Don'ts for beginners

With a trading account and demat account you are ready to trade. But if you are a beginner in the stock markets, then that is not all. You also need to keep a tab on some major do’s and don’ts before you venture into investing in the stock markets. Let us look at 10 such key dos and don’ts for investors.

10 important do’s and don’ts for investment beginners

Do’s are about doing the right things in the market when you are starting off on your investing journey while the don’ts are the ones to avoid. Here are ten such important dos and don’ts for investing beginners.

  1. Do your research before investing? Remember, research of a stock is not a rocket science and it is all about getting your research process right. Get comfortable reading the balance sheets and income statements of a company. Also read the Management Discussion and Analysis (MDA) of the stock you are planning to invest in.

  2. Start with your goals in mind. You must be clear about how much risk you are willing to take and how much risk you can afford to take. Your equity portfolio should be within the limits defined by your allocation. Always start with a plan.

  3. Don’t put all your eggs in one basket. That is age old wisdom and applies to investing as well. In technical parlance it is called diversification where you effectively spread your equity investments across sectors and themes so that your investment performance is not dependent on any one stock or sector.

  4. Take a long term view and cultivate that habit in the very beginning. It is futile to time the market. Not only that it is hard to consistently get the tops and bottoms of the market right but it hardly makes any difference to your eventual returns.

  5. Try to invest consistently and regularly instead of putting a large corpus in a stock of your choice. The advantage of being regular is that it instils discipline in your investment and also gives the added benefit of rupee cost averaging. That means; over time your average cost of investing comes down.

  6. Even through equity is about the long term, try to get bargains. Even if you are convinced about the long term prospects of Infosys, it makes a lot of business sense to buy at Rs.650 than at Rs.750. Quite often, a market correction creates salivating bargains. Use such corrections to add quality stocks at low prices.

  7. Divide your equity portfolio between core holdings and satellite holdings. Your core holdings are your long term investment portfolio and you don’t sell these stocks at every correction. On the other hand, the satellite portfolios are more of a trading portfolio where you look out for short to medium term opportunities in the market. Have a separate approach to both these types of stocks.

  8. Don’t ignore trading costs. Even if you are a long term investor, take at a close look at your costs. Your cost is not just about brokerage costs but there are a number of other costs too. There are statutory costs, exchange charges, demat AMC, DIS charges, demat and remat charges etc. All these need to be added to calculate your effective cost. Nowadays, it makes a lot of sense to opt for low-cost discount brokers who can give the same execution at a much lower cost.

  9. As a beginner, remember that quality always wins in the end. When we talk about quality we are talking about quality at a number of levels. Look at quality of earnings; more of the earnings must be coming from the core business. Look at profitability; the company must be earning more margins than the peer group. Take stock of asset turnover; it tells you how efficiently the business is using assets. At a qualitative level, prefer companies that have high standard of disclosure and transparency. Large caps or mid caps, this quality approach always works in your favour.

  10. Make effective use of technology and if you are a beginner then you better get used to it early. Ideally use the online trading platform; it gives you a lot more control over your trades. Also, if possible you can download the app on your smart phone which allows you to trade on the run. Get used to reading electronic contract notes and ledgers; they are a lot more convenient and environment friendly than printed stuff.

In an effort to chase stocks, investors tend to forget that investment success is a lot more about discipline than about skills or flair. It is in your hands to make your investments work in a systematic manner.

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Everything you need to know about Burger King IPO

Everything you need to know about Burger King IPO
by Mrinmai Shinde 12/01/2020
Quick service restaurant chain, Burger King India is launching its three-days long IPO from 2nd December to 4th December. The company has set the price band at ?59-?60 per share for its IPO.

Through the IPO the company aims at raising ?810 crore. Of the total amount the promoter entity QSR Asia Pte Ltd will sell up to 60 million shares, which would amount to ?360 crore while a fresh issue of shares will aggregate to ?450 crore. The company has also raised a pre-IPO funding of ?92 crore from public markets investor Amansa Investments Ltd at ?58.5 per share.

Burger King IPO details at a glance

IPO Date

Dec 2, 2020 - Dec 4, 2020

Finalisation of Basis of Allotment

Dec 9, 2020

Initiation of refunds

Dec 10, 2020

Transfer of shares to demat accounts

Dec 11, 2020

Listing Date

Dec 14, 2020

Issue Size

?810.00 Cr

Fresh Issue

?450.00 Cr

Offer for Sale

?360.00 Cr

Face Value

?10 per equity share

IPO Price

?59 to ?60 per equity share

Min Order Quantity (each lot)

250 Equity Shares

Min Amount Cut off

?15,000

Maximum Lots allowed

3250 Shares (13 lots)


Want to know our suggestion? Read here - Burger King IPO Note.

Things you need to know:

Burger King India Limited is one of the fastest growing international QSR chains in India during the first five years of operations based on the number of restaurants. Talking about the global presence, when measured by the number of restaurants, with a network of 18,675 restaurants in over 100 countries, Burger King is the second-largest fast food burger brand globally. In India, the company owns 261 restaurants which include eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India.

Burger King India has exclusive franchise rights in India and a strong customer value preposition. Apart from the customer loyalty and brand value, strong management and a vertically scalable supply chain are the company’s key strengths. The company will use the funds raised through the IPO to finance the roll-out of new company-owned Burger King Restaurants, repayment or prepayment of outstanding borrowings and to meet the general corporate purposes.

If you are looking for the short-term gains through the IPO, you need to bear in mind that if there is a spike in the Covid cases and there is another round of lockdown, then the business might take a hit. The termination of the Master Franchise and Development Agreement could also pose a threat to the business. Lack of identification of the locations when expanding in new regions, and deteriorating relations with third party delivery aggregators apart from perceived and real health concerns along with shifting food preferences and habits are a few things to look for. Having said that, the investment would turn out to be promising in long term.

This year has seen a lot of good IPOs, which has encouraged a lot of new investors to enter the markets. Apart from Burger King, the other companies that issued IPOs this year include SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Route Mobile, Happiest Minds Technologies, Angel Broking, Chemcon Speciality Chemicals, Computer Age Management Services, Mazagon Dock Shipbuilders, UTI AMC, Likhitha Infrastructure, Equitas Small Finance Bank and Gland Pharma.

How to apply for Burger King IPO?
  • In 5paisa Trading App, go to IPO Section reflected on the home screen
  • Click on Apply IPO
  • Enter Quantity and Price to bid for
  • Enter UPI id to block funds on
  • Later in the day you will receive funds block confirmation in your UPI app, which needs to be approved

If you are not a 5pasia customer, you can apply for the IPO using any supported UPI apps. Click here to find the list of UPI apps and banks supporting the IPO application.

Watch the video below to know more about the Burger King IPO

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Union Budget 2020 – What’s It All About?

Union Budget 2020
01/02/2020

Budget 2020 was rich on expectations but the exemptions in the budget were much lower than what the market desired. The impact was visible in the performance of the stock market indices which cracked in response. While a detailed analysis is still due, the immediate reaction of the market appears to be that there was no big bang announcement in the Union Budget despite the tough macro conditions. Here are some of the major announcements in the Union Budget 2020.

Response to macro pressures

  • Nominal growth for fiscal year 2020-21 has been pegged at 10%. The real rate of GDP growth could be in the range of 5.5% to 6% depending on the nominal growth actually achieved as even 10% does look quite steep at this point in time.

  • The budget 2020 has fully utilised the 50 bps leeway on fiscal deficit offered by the N K Singh Committee. For 2019-20, the fiscal deficit has been pegged at 3.8% instead of 3.3% while for the fiscal year 2020-21 it is pegged at 3.5% instead of 3%.

  • There is some positive impact on post-harvest infrastructure. To improve post harvest infrastructure, including cold storage, the budget has announced viability funding based on public-private-partnership. Indian Railways will run dedicated trains to support the cold chain plan.

Some cheer for Corporates and MSMEs

  • Despite the lack of any cost advantage, the Budget 2020 has outlined big plans for manufacture of mobile phones and electronic equipment and semiconductor packaging. In addition, the 15% concessional tax will be extended to the power sector too.

  • Finally, MSMEs have something to be really pleased about. Invoice financing via the factoring method will be extended to MSME as will be the issue of subordinated debt to MSMEs and handholding in the early stages.

No cheer for markets and that was evident

  • LTCG on equity stocks and equity funds was not scrapped, despite the STT being introduced in 2004 in lieu of LTCG tax. This is resulting in the cascading effect of STT plus LTCG tax and that is adding to the costs of traders and investors.

  • While DDT has been scrapped on equity and on equity funds, it comes back in another form. At the same time, the dividend distribution tax on debt funds will continue as before. There will be a single point of taxing dividends as other income at the applicable peak rates of tax for individuals.

  • Efforts are being made to reduce tax burden on middle class. People earning in the range of Rs.5 lakh to Rs.15 lakhs will see reduction in taxes.

Direct tax; more complicated than effective

  • Direct tax regime has suddenly become a lot more complicated. There will be two regimes; first regime will focus on status quo with all exemptions and rebates. The new regime with lower rates applicable will be devoid of exemptions and rebates. Loss of exemptions could be a big cost as many exemptions are virtually mandatory or inevitable like life premiums, provident fund, tuition fees, home principal etc.

  • Under the new tax regime, direct taxes will be as under:

Income bracket

Below 5l

5l to 7.5l

7.5l to 10l

10l to 12.5l

12.5l to 15l

Above 15l

Tax Rate (%)

Zero

10

15

20

25

30

Above table represents the new regime. If you opt for the second option, then your IT form will be auto-filled. That simplicity appears to be the only visible advantage.

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Hurled by the IPO Rush? Here’s All You Need to Know About ASBA

ASBA IPO
IPO
by Nikita Bhoota 27/02/2020

ASBA (applications supported by blocked amounts) was introduced by SEBI to protect the interests of the retail investors. ASBA can used to apply for IPOs, FPOs, rights issues etc. In ASBA, the designated bank account only gets blocked to the extent of the application money. On the date of allotment, the amount gets debited to the extent of allotted shares and the balance gets released. If zero shares are allotted to the applicant, then the entire blocked amount under ASBA is released.

Who can make an ASBA investment?

ASBA is mandatory for all IPOs after January 01st 2016. However, an ASBA investor has to fulfil some basic conditions.

  • He must be a resident individual applying under the Retail Quota
  • Bid must be at cut-off price with a single option of number of shares bid
  • ASBA application has to be made through self certified syndicate bankers (SCSB)
  • Such price intibid made in ASBA cannot be revised later on
  • ASBA cannot be used for other categories like employees / shareholders etc.

What are the advantages of ASBA?

ASBA comes as a major boon to retail investors. Here are some of the major advantages.

  • Since the amount is only blocked, you continue to earn interest
  • You don’t worry about refunds as only the allotment money is debited
  • The application process is very simple and you can apply through your bank
  • The blocked amount is included in average quarterly balance (AQB)
  • Even through bids cannot be revised, they can be cancelled.

How can an ASBA application be cancelled?

While an ASBA application cannot be revised as per the rules, the ASBA application can certainly be cancelled. There are two distinct situations here. If the IPO has not closed, you can cancel the ASBA application through your online trading account or through the bank. Your SCSB will cancel the bid and unblock the amount right away. However, if you withdraw after the issue closes, then you have to write to the registrar to cancel the bid. The SCSB will only remove the block after the allotment is complete and they get intimation from the registrar.

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Here’s All You Need to Know About Getting a Demat Account

Open Demat Account
by 5paisa Research Team 25/03/2020

Demat Account is almost like a bank account. Just like you hold funds in your bank account, you hold shares and other securities in the Demat Account. Having a Demat Account is mandatory for trading in equities as per SEBI regulations. 

How to open Demat Account?

Demat Account can be opened online or offline. It is normally opened along with trading account (TCD) by the broker. Demat Account can be opened with any authorised depository participant (DP); which could be a bank or a broker. Here is how to open a Demat Account.

For offline Demat Account, you need to fill up the demat form and sign the demat agreement and submit to your DP. Basic documents like PAN Card, Proof of identity, Proof of residence and cancelled cheque are required. Copies of self-attested documents must be submitted to the DP along with the signed DP agreement. Carry the originals for verification by the officer. Demat account opening can take up to 4-5 days, if all the documents are in place.

Online Demat Accounts can be opened by filling up the online form on the DP website. You must authenticate your identify and address with your Aadhar Card and verify the same with OTP sent to mobile. An in-person-verification (IPV) has to be done before fully activating the demat account. Only Aadhar address will be considered for online demat.

Check: Procedure to open a Demat account


How to use the Demat Account

With a demat account, your purchase, sale and holding of securities are in electronic mode. You must issue a signed Debit Instruction Slip (DIS) to sell shares or you can give a power of attorney (POA) to the broker. When you sell shares, the demat account gets debited and when you buy shares the demat account gets credited.  All corporate actions like bonuses and splits are automatically credited to your demat account. Dividends are directly credited to the mapped bank account. 

Documents Required for Demat Account

As stated earlier, demat account opening requires proof of identity and proof of address. Proof of identity can be any statutorily issued photo identity like passport, Aadhar, driving license, voter card etc. Proof of address can be any of the above with complete and latest address or electricity or land line bill. In case of online demat account opening, the Aadhar address will be considered. In addition, submission of PAN card and cancelled cheque are mandatory for opening demat account.

Importance of having a Demat account

Here are some of the key uses of having a demat account.

1. It facilitates non-physical holding of securities

2. Demat account can hold equities, bonds, ETFs, gold bonds and other securities

3. Corporate actions are automatically executed in demat account

4. One point intimation of change in address, email, mobile to all companies

5. Eliminates risk of physical holdings like bad delivery, mutilation of certificates, loss in transit, forgery, fake certificates etc.

6. Trading shares, holding in demat and bank transfers become one seamless chain if you opt for online trading

7. Demat is also cost effective compared to dealing in physical certificates