In the fast-growing fintech world, stock markets have risen dramatically. About 15,000,000 new investors have joined the stock market since March 2021. A trading account and a demat account are two key components of stock trading, but what is a demat account and what is the difference between a demat account and a trading account? Simply put, a trading account is a place where you keep that part of your money that you want to invest, while a demat account is a place where you hold the shares and other investments you bought.
As the number of investors increases rapidly, so does the possibility of certain abuses. Some common mistakes that an investor must be aware of are:
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Presenting garbage as gold to get some money: Many traders engage in selling penny stocks, fake banks and other inappropriate stocks to get you to invest for higher returns, but that never happens.
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We try to play with your mind: Many times brokers try to lure you by targeting your ethnic group, gender, social status, religion and more.
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Unnecessary payment in advance: many times they take advance payments for goods that will arrive, but never actually arrive. Also, they can take a big cost of opening an account.
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Power of Attorney (POA): Brokers can take a power of attorney from a trading investor and later misuse it for their personal gain.
The Indian Securities Bureau (SEBI) and the Reserve Bank of India (RBI) regulate and address these issues and abuses. However, relying on the authorities alone is not enough, we must be careful on our part. So what can we do to avoid being scammed and losing hard earned money? Here are some guidelines to follow to enter the world of market investing to save you from these scams:
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The cost of opening a demat account usually varies between 0 and Rs. 300. If your broker charges alarmingly more than this, be careful and look at the offers of other brokers.
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Avoid giving a power of attorney because giving a power of attorney to your broker is not a mandatory guideline of SEBI. Even if it is mandatory to do so with your broker, read all the clauses carefully and make sure there are no holes and only then sign them.
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Be careful when a broker tries to be too friendly or personal with you, because he may be trying to seduce and deceive you later. Professionalism with a broker is always an added advantage.
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Don’t fall for the false promise of high yields. The stock market is not a magic wand, it takes time to make legitimate money, and most of the time fast money is a scam.
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Research your finances and management before investing, regardless of the information the broker gives you.
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Keep track of all the funds in your trading account and the funds that are with your broker.
Check daily statements and messages sent by regulators and bodies such as CDSL, NDSL and SEBI regarding your investments and general guidelines.
Keep your contact information up to date and available to the authorities and your brokerage house to continue receiving updates.
Finally, it is suggested that while the stock market is growing rapidly and returns look exciting, it is important to be grounded and invest carefully. Although regulators such as SEBI are there to prevent abuses, it is the obligation of investors to be aware and cautious.