"Can I open multiple trading accounts?" Many investors ask themselves this question before opening a trading account. In fact, some may ask this question even after they have opened their trading account. It is natural for investors to have several questions concerning the significance of opening a trading account. A trading account lets investors buy and sell securities in the stock market, which makes it an indispensable requirement for anyone wanting to transact securities in the Indian stock market. In India, you can open a trading account by approaching a stockbroker or visiting their website.
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Can You Open Multiple Trading Accounts?
Coming back to the question, “Can I open multiple trading accounts?” If that is a question on your mind, then “yes” is the straightforward answer. SEBI (Securities and Exchange Board of India), the regulator of the Indian stock market, does not restrict investors from opening multiple trading accounts. However, you are restricted to opening one trading account with one stockbroker, under a single PAN ID. So if you wish to open more than one trading account, you will have to approach another stockbroker. Since most stockbrokers provide amenities for opening trading accounts over the internet, opening another trading account should not be a hassle.
Now that you know you can easily open more than one trading account, the logical question is “Do I require multiple trading accounts?” The answer to the second question is a lot more complicated compared to the first.
When should I open multiple trading accounts?
In the days of traditional investing, most retail investors only had access to a few stockbrokers, whom they approached to carry out trading activities in the Indian stock market. However, in today’s internet age, investors have several choices when it comes to picking a stockbroker. Hence, stockbrokers attempt to offer a combination of facilities and benefits to win the favor of a particular demographic. However, this frequently puts investors in a bind because it is difficult to select the right broker. Which is why some investors may consider opening a second account to get access to other trading benefits they do not get with the first account.
However, getting access to more trading features by itself is not a good enough reason to open another trading account. A prudent person must look beyond the features and services provided by the stockbroker before opening another demat account. You can open another demat account only if you believe the extra account can help you better focus on achieving your investing goal.
For example, some seasoned investors may open two trading accounts, as they may want to bifurcate their investment on the basis of their investment horizon. Likewise, some may do the same, and maintain one trading account solely for investments and another for intraday trading. So, they may use one account for short-term purchases and the other-for long-term investments.
Pros of Opening More Than One Trading Account
Now that you know when you must consider opening another demat account, let us look at the pros of opening more than one trading account. Let us understand them by referring to the above example of maintaining separate trading accounts for long-term investments and short-term trades.
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Better Focus
By having separate trading accounts for long-term investments and short-term trades, they can better focus on and execute both approaches effectively. It helps keep the investors on the right track and prevents them from making long-term investing decisions based on short-term results. Moreover, investors will not have to look at their long term portfolio everyday and be bothered by market volatility.
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Easy to Manage
Along with helping investors focus and stay on the right path, an extra trading account also keeps things organized. Assume you invested one lakh in a stock five years ago and are now reaping the benefits. Today, however, the same stock appears on your radar as an appealing swing trading opportunity.With a separate trading account for short-term trading, you can easily trade the stock, without being bothered by its impact on the long-term portfolio. At the same time, fluctuations in your investments will not skew the performance of your trading portfolio.
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More Benefits for Stockbrokers
Having multiple trading accounts gives you access to more benefits. For example, you may get access to more research reports and perspectives.
Cons of Opening More Than One Trading Account?
So, opening multiple trading accounts has some compelling benefits. However, doing so also has some significant disadvantages.
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More Fees
Remember that when you open multiple trading accounts, you will also be paying for it. You will have to pay AMC charges (Annual Maintenance Charges) for each account.
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Difficult to Track
Having multiple trading accounts helps with better execution of the strategy and portfolio management . However, that is only possible if you have the time to put into research and portfolio management. If you do not have the time to monitor several trading accounts, you might just end up neglecting one.
Conclusion
So, now that you know the pros and cons of opening multiple trading accounts, should you open one? To answer that, you need to ask yourself, how an extra trading account can benefit you. Do you plan on executing different trading styles? Will it help you manage and organize your trade securities more effectively? Even if it does, you need to evaluate if you have the extra time to manage two accounts. At the same time, you decide if it is worth paying the additional fees. Lastly, you should even have enough capital to maintain a separate account for trading and investing. If you are just a beginner testing the waters of the market, it is better to gain some experience before you get too ambitious.
Most brokers bundle trading accounts with demat accounts, so, on the broker’s website, click the prompt to open a demat account. Every broker provides different services, and the fees and brokerage demanded by every broker differ. Hence, research well before opening a demat and trading account with any broker.
