A lot of times people tell me that all their shares are kept with the broker with whom they have opened a trading account. These people are long term investors cum traders.
It is for this reason I decided to share my insights regarding this. First of all, there is a differnce between trading and investment portfolio. Trading portfolio is the list of stocks that you are holding for the purpose of trading. You take advantage of the movement in the market to make short term profits as well as intra day gains. Investment portfolio is for your long term needs. A person does not generally trade in this. This investment is made for buying a car, a house, for marriage, higher education etc. Investment portfolio comprises of stocks which one buys and forgets for atleast 5 years if not more.
Hence it is very important that the shares which one purchases for long term should be kept in a separate demat account away from the broker with whom you have opened a trading account. Only trading portfolio should be kept with him/her. The investment portfolio should be kept in a separate demat account which is not linked with the trading account . In simple words, your broker should not have access to your long term investments. Trading portfolio should ideally be kept with a broker because one continuously trades in them. If these shares are kept in a separate demat account, a lot of charges would be incurred every time a person sells some shares. So if a person sells shares of 5 different companies, he/she would have to incur an additional transaction charge per company for 5 companies.
I hope this post is helpful.
Your friend,
Vivek
It is for this reason I decided to share my insights regarding this. First of all, there is a differnce between trading and investment portfolio. Trading portfolio is the list of stocks that you are holding for the purpose of trading. You take advantage of the movement in the market to make short term profits as well as intra day gains. Investment portfolio is for your long term needs. A person does not generally trade in this. This investment is made for buying a car, a house, for marriage, higher education etc. Investment portfolio comprises of stocks which one buys and forgets for atleast 5 years if not more.
Hence it is very important that the shares which one purchases for long term should be kept in a separate demat account away from the broker with whom you have opened a trading account. Only trading portfolio should be kept with him/her. The investment portfolio should be kept in a separate demat account which is not linked with the trading account . In simple words, your broker should not have access to your long term investments. Trading portfolio should ideally be kept with a broker because one continuously trades in them. If these shares are kept in a separate demat account, a lot of charges would be incurred every time a person sells some shares. So if a person sells shares of 5 different companies, he/she would have to incur an additional transaction charge per company for 5 companies.
I hope this post is helpful.
Your friend,
Vivek
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