How is Zero Brokerage Trading Beneficial

With the onset of online trading and the easier access to the internet and technology, the scenarios that exist in the trading markets have undergone great changes. One of the huge changes that came about was the introduction of Zero Brokerage. This was an entirely new concept that was thought impossible in the traditional scenario. However, the accessibility brought about by online trading has made it a reality in today’s times.

        

           Basically, each time you invest in a share, you have to pay a certain amount of brokerage to the share broker you work with. These charges were traditionally high since all the major brokering firms had operations in different cities and the cost of running the business was generally high. Since all these costs were factored into the brokerage rates charged, the rates could be anywhere between 1% and 2%.

However, KYC norms were relaxed along with the introduction of online trading and discount brokers began to become the new norm. With discount brokers, most of the trading began to take place online – hence eliminating a large amount of transaction costs as well as the need to physically contact the broker. Now, it is possible to open a demat account and trading account online without having to visit the broker. This also reduced the need to actually have an office and the overheads associated with this.

The difference in brokerage – as well as the reason zero brokerage has become a reality – is due to the fact that while full service brokerage charged their fees based on a percentage of total volume of trade, a flat brokerage structure is provided by the discount brokers. For instance, if the direct charge by a firm is 0.5%, then for a trade of Rs. 1 lakh, you would have to pay Rs.500 although the amount of work put into closing the trade, no matter the amount, is basically the same. This is why it is preferable to work with discount brokers who have the same charges no matter the volume of trade. Further, with zero brokerage, they charge absolutely no money for this trading

All of this leads to the fact that if you are a beginner who is only venturing into the stock market or merely wish to get a feel for trading with the stock market, then it is the best account for you since it eliminates the need to pay any brokerage at all. If you are someone who wants to trade daily, then this is the best option for you since it is tough to earn huge returns while paying a huge part of the money as brokerage charges. It applies to when the deal turns out to be a loss as well since no additional amount has to be paid for the transaction made.

        Hence, zero brokerage accounts have truly revolutionised the way trading has been done. For any investor staring out in the stock market, it is definitely a good option to begin with. It ensures that you can enjoy the full amount of your returns.