What Is A Demat Account?
Demat or the dematerialized account is a must for Indian individuals to trade in listed stocks. Following this directive, the Securities Exchange Board of India (SEBI) mandates that a Demat account be maintained, where shares and securities are stored in electronic form.
It is opened by the investor while registering with an investment broker (or sub-broker). In short, the online trading method is easier and hassle-free.
Why Do I Need A Demat Account?
Nowadays, virtually all trades must be dematerialized. Although the market regulator, SEBI has allowed trades of up to 500 shares to be settled in physical form, traders no longer wish to hold physical shares.
Nowadays, nobody is trading in physical shares. Because virtually all trade must be dematerialized, which is a must for trading and investment. Therefore, a Demat account is a must for trade and investment.
Below Mentioned Are The Benefits Of Opening A Demat Account:
- No entry barrier
It becomes the largest ever barrier to trading in equities if you don’t have a Demat account.
- Can accommodate mutual funds as well:
The government has now authorized the purchase and sale of schemes for mutual funds on stock exchanges.
- Attractive Rates
If you saving accounts with banks, most of them provide reasonable prices for a Demat account. The opening of a Demat account with the same bank, broker, or financial institution also has several other advantages.
- Get Regular Account statements:
Depository, where your shares are held electronically, offers you an account statement that clearly states the shares that you traded and your account balance. So, you are reduced by the hassle of calculating your shares manually.
- Other Services offered by depository:
In addition to account statements, the depository also provides you with an electronic resolution of transactions committing/mortgaging dematerialized securities for bank loans, nomination facility for Demat accounts to name a few.
- Lesser cost of maintenance:
Annual maintenance costs are lower than the cost of keeping true inventory Certificates that are charged by the depository.
- Non-cash Corporate Entitlements:
Non-cash corporate privileges such as rights and bonuses are credited straight to your Demat account. In reality, the expenses of brokerage have been reduced.
- Ease of access:
Demat accounts can be accessed using a computer, smartphone, or other smart devices. Moreover, instruction slips can be submitted electronically instead of paper slips.
- Immediate transfer of shares:
Previously, to get the shares transferred, shares had to be sent to the registrar or the company. It takes months and the risk of loss has always existed. However, today shares transfer is a matter of seconds.
- No risk of Theft, mutilation, and loss of certificates:
Dealing in physical securities are exposed to the risks like theft of stocks, mutilation of certificates, and loss of certificates during movements to and from the registrars. This is not an issue when handling dematerialized stocks.
- No Stamp Duty
Dematerialized shares help you get rid of the cost of share transfer stamps. In addition, travel costs for the acquisition of stamps were also involved in the exchange.
- Ease of Nomination
Earlier with share certificates, it was not possible to nominate somebody in case you choose not to. However, the nomination is possible with a Demat account.
- All-in-One Account
It allows you to handle debts, bonds, NCDs, etc in a single account. This account covers most of the tradable securities.
The greatest advantage of opening a Demat account is that it is free. Many banks and financial organizations are currently offering Free Demat Account.