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If you’ve just started on your role with a company, its likely that a few snazzy private banks have made pitches to you to open your salary account with them. A salary account is usually a savings bank account with add-ons such as an ATM and debit card, credit card if you are eligible for one; some banks may throw in benefits like a personal insurance cover. But a savings bank account alone is not enough to get you started on your investing journey. You need three kinds of accounts to make a proper debut at investing.
A sweep account
Before choosing your bank, check if it offers you the facility of a sweep account. A sweep account is a savings bank account linked to a fixed deposit with the same bank. Whenever the balance in your savings bank account exceeds a certain sum, the extra money will be automatically ‘swept’ into a fixed deposit with the same bank. What’s the benefit of this? Well The advantage of sweep accounts is that they also work in the reverse. If you have payments or auto debits hitting your savings account, the FDs you created will be automatically liquidated to meet your payments. This can introduce some complexities into your accounts statements. But a sweep account is a good hack that ensures you don’t idle money in a savings account at low rates.
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A demat-cum-stock trading account
You are not going to be dabbling in the stock market, you say. But today, owning a demat account is essential for every investor today. A demat account is the electronic account where any shares, bonds, ETFs, sovereign gold bonds and even mutual funds if you wish it, are lodged in your name and held securely by a depository. A depository is an institution that maintains an electronic repository for your financial assets. A demat account helps you get a one-shot view of many assets you hold – shares, bonds, mutual funds, ETFs, sovereign gold bonds, gold ETFs.
To make transactions to buy or sell the securities in it, you need to open a trading account with a stock broker. You can open a demat cum trading account with leading private banks such as ICICI Bank, HDFC Bank etc, which also have broking arms. Sych 3-in-1 trading accounts seamlessly link your bank account with your trading and demat accounts. You can also open demat cum trading accounts with established brokers like Zerodha, Groww, Motilal Oswal etc in which case these accounts will be linked to one of your bank accounts for smooth operation.
Mutual fund execution platform
Mutual funds are the go-to category for working professionals who would like to invest in equities and debt, through professional managers. When buying mutual funds, you can take the regular route where you go through an offline or online distributor, or direct route, where you invest without the help of a distributor. Regular plans charge you an additional distributor commission to compensate the person who facilitates your transaction. Direct plans come without this commission, and thus offer lower costs and higher returns. But they require you to choose and track mutual funds on your own.
Mutual fund execution platforms may offer either regular or direct plans. Platforms like fundsindia.com facilitate investments through regular plans. Those like Kuvera, Groww and Coin allow you to invest in direct plans. Opening an account with one of these entities can help you manage your mutual fund SIPs and investments easily. If you open 3-in-1 trading accounts with banks as mentioned above, they usually offer a channel for you to invest in the regular plans of mutual funds too.
In addition to these, you may choose to open a Public Provident Fund account or a National Pension System account to help you plan towards long term goals such as retirement. PPF offers fixed returns of about 7% guaranteed by the government while NPS allows you to invest in market-linked instruments via professional managers like mutual funds do.
(Host: Aarati Krishnan, Producer: Anjana PV, Camera: Bijoy Ghosh & V Nivedita)
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