Significant Features of Demat Account
In India, people invest in different financial instruments for multiplying their savings. Although, to start trading you are required to open a demat account. Demat refers to the dematerialization of share certificates into electronic form.
A demat account is considered to be a storehouse for all the information of securities transactions you are executing in the stock market. All types of financial instruments such as stocks, bonds, exchange-traded funds, mutual funds, and government securities, etc. can be stored in a demat account.
Demat account are basically electronic tracking records of your owned assets. A person without a demat account is not allowed to execute any trading in the stock market in India. However, for opening a demat account you need to appoint a broker to help you with assistance in the account opening process. The charges involved in opening a demat account depend on the brokerage plans offered by your DP. However, some DPs offer zero brokerage charges for opening an account for maximizing their retail production.
Why do we need a demat account?
There are several reasons stated for needing a demat account while trading or investing in the stock market. They offer different services and facilities along with a permanent record of all your transactions.
Some of the reasons are given below-
- Act as a safe wallet- Demat accounts act as a safe wallet for traders. It eliminates the risk of misplacing physical share certificates, theft, or forgery of signature in the physical certificates. It is stored safely in electronic form where storage risks are reduced.
- No stamp duty- A demat account doesn’t involve additional charges of stamp duty or excessive paperwork for the transfer of shares. You can trade in any amount of securities whether large or small at your convenience.
- No delays and bad deliveries- Due to online transfer, there is no delay in payments or settlement of shares.
- No minimum balance required- You can open your demat account with no possession of any shares or security holdings. Also, you don’t need to maintain a minimum balance.
- Freeze your account whenever required- You can freeze your demat account whenever you want to stop the credit or debit flow. If you are an occasional trader, then you can freeze your account to avoid any annual maintenance charges levied on it.
- Access to market information- Once you open a demat account, you get instant access to in-depth market reports, live-market news, prevailing prices, and advanced investment comparison tools. This helps the investor to trade seamlessly with accurate knowledge about the stock market.
- Accessibility anywhere at any time- You get access to your shares and bonds holdings whenever required. You can login into your demat account and track your orders at your convenience.
- The execution of trades becomes easier and instant. Investors can also convert their online securities into physical form whenever required.
Also, any person can open more than one demat account but with different brokers for diversifying their portfolio or segregating your investments. Demat accounts have eased the process of trading and investments.