Before you know how to open a Demat account, you need to understand what a Demat account is. It is quite similar to a bank account. In a bank account, you deposit cash to your account, and the entries with respect to the deposit show up in your passbook. But in this account, securities are stored in electronic forms, and it is from here all the debits and credits are made. Having a Demat account has proved to be very useful. It does not require much paperwork, takes minimum time to settle transactions, and is quite safe since it holds all the investments at one particular place. Being new to the business, many investors fail to understand the operations, technicalities, and benefits of having such an account. If you want to open a Demat account online or are an experienced investor already, the information provided below can be handy.
The Demat account can be handled effortlessly and straightforwardly. When you decide to invest, register yourself with an investment-broker. You will require a stable internet connection and a transaction password (this will be provided after opening the Demat account) for future dealings. For opening the account, you will have to choose a Depository participant (DP) who will be acting as the agent against all your deposits. Once you submit the required documents like address proof, identification proof, passport size photograph, and pan card details, the investor will agree to the given terms and conditions. Then a person to person verification will be initiated after which the account holder will be given the details which will be needed for future investments. Besides holding a Demat account, the budding investor will also require a trading account and a broker to sell and buy stocks, derivatives, and shares. The purchased shares are transferred to the investor’s Demat account after the transaction is made. Generally, it takes two working days for the debit or credit of the stock. The trading account, on the other hand, keeps a record of all the transactions that are made by the investor.
How do you use your Demat account?
No stamp paper, signatures or paperwork are required in the procedure of investment or withdrawal, thus eliminating vast amounts of time and money consumption. Also, having securities stored in dematerialized forms ensures safety from theft and loss of documents.
With advancements, SEBI has cultivated the concept of the Demat account vehemently. It has focused on benefits like security, economy, convenience, and ease to encourage citizens. Without any loss of documents, theft, and vandalization, this is a more convenient investment option. All the shares Demat account can be allocated at one time and the investors can notice the current Demat holdings. You can also assign the shares from your market purchase through the “Allocate share” option. However, the period in which you can allocate shares depends on the type and regularity of your purchase. The records will be in your trading account and your broker will guide you through.
Trade shares only with a Demat account
You might wonder whether you can trade your shares without opening a Demat account online. The answer is no. Since the trade of equity involves the delivery of the shares, it is compulsory to have a Demat account. It is also challenging and hectic to buy shares in materialized forms. Thus investors, buyers, and brokers willing to deal with this are negligible in number. But you do not require a Demat account if you are eager to trade currency, derivatives, and commodities, as there is no delivery of stocks and it is generally settled with cash.
You can receive statements for your transactions at your doorstep or can earn additional benefits from the bonus or splits declared by the corporates. Thus this is a safe choice to invest when you do not want much burden on your shoulders. The procedure is effortless, less time consuming, and easy to handle even for budding aspirants. In emergencies, you can give someone a power of attorney. You can also choose a nominee for your account in case of your demise.