Zerodha & Upstox vs ICICI Direct & HDFC Securities
A quick guide about who your stock brokers are and which kind of stock broker you should choose
“24 lakhs demat accounts were opened in just three months of lockdown.” This was one of the headlines of The Indian Express. Maybe Indians found their long-lost love with stock markets while being at home. But who benefitted the most out of this sudden influx? No points for guessing as it is like an adage, between the buyer and a seller, it’s the facilitator who makes maximum profit. And in this case, the stockbrokers are the facilitators who emerged as real winners with trophy star being none other than – Zerodha!
On one end brokers like Zerodha and Upstox were celebrating their much-deserved success, on the other hand there were some of the same league guys who were digging hard to find where they were lagging and going wrong – the clan of the likes of ICICI Securities and HDFC Securities.
A quick stat to justify this comparison statement – In last 5 years, where ICICI securities and HDFC Securities have grown at CAGR of 23% and 21% respectively; Zerodha grew at a massive CAGR of 162%.
How was Zerodha able to pull out such a stellar show, we’ll come to that later, but for now a quick clarification that HDFC Securties & ICICI securities are a different class of stock brokers termed as full service broker, while Zerodha(or Upstox) is a different class known as Discount brokers. Brokers mein bhi subclass, sounds interesting right?
So just a glimpse of who the stock brokers are - They are the agents which make our buying of stocks from the stock markets possible. These facilitators are registered with various stock exchanges and regulated by SEBI (Securities and Exchange Board of India). Now let’s come to the old question, what are the categories of these stock brokers: Full Service and Discount Brokers?
The major difference between these are the trading tips and research facilities which are provided by full service stock brokers which isn’t the case with discount brokers. Along with it some premium services come in like a dedicated relationship manager, and customized wealth and financial planning services which of course can be availed face to face even by visting a nearby branch office of the broker. However, in the case of discount brokers, they are completely technology driven providing only a trading platform. There’s no gyaan involved and no physical or virtual catch up service.
Now, there’s another adage – “There ain't no such thing as a free lunch.” Hence, it’s logical that the one giving advices and researches would charge more. So yes, the full time stock brokers levy much heavy charges as compared to the discount brokers. And this would definitely give rise to the next logical question, which type of brokers are better?
Another quick but fun fact, we the writers at Finns&Marks are MBA, and for any MBA, there’s a same answer for any such situation which is “IT DEPENDS”. But here in this situation it really makes sense to comment it depends, because if one feels that no external research advice is needed to pick stocks and he/she is best in investing one’s own money, then there’s no need to pay hefty charges of a full service broker. And in case of Indians, no testament is needed to justify how much we hate paying for advices specially the talented, tech savvy millennials. So, there’s nothing more left to tell why discounted brokers like Zerodha & Upstox have been rallying high.
Doesn’t this remind you of the famous Sprite catchphrase – Seedhi Baat, No Bakwaas in a different avatar – “Only trades, no persuades!”
And we also don’t persuade, but if you find our content top grade then don’t forget to subscribe:
By: Anmol Gupta | Isha Garg