Hi, Friends welcome to another article on sharespricetarget.com, in this article we briefly discuss on Demat Account, how Demat Account Works?, What are the types?, advantages, and disadvantages of Demat Account. Also, we can discuss Why Demat Account is important? and how to choose the right broker for investing.
In recent times data shows over 35 million Demat accounts were opened in India till Dec 22, which is 12% higher than every year. Today many of us are interested to invest in the share market, so before investing you need to know about its basics like a Demat account, and how to choose the perfect broker to open a Demat account. Let’s see full details on Demat Account.
What Is Demat Account?
Demat Account means Dematerialised Account, which helps investors to keep their shares, bonds, and securities in electronic form. In Share Market during trading, you can buy individual shares, and sell your shares with the help of a Demat Account.
For, example we know a Savings Account or Bank Account which holds our money and help us to share our money in terms of electronic form in a safe manner. A Demat Account is used in Share Market where you can buy and sell your shares, ETFs, bonds, etc in a safer manner in an electronic form.
With the use of Demat account investors can easily track their shares, and doesn’t require the physical certificate of their shares. In 1996 National Stock Exchange introduced Demat Account to reduce the risk factors like theft and damage.
Demat Account Means Dematerialized account which can hold your securities, shares, bonds, ETF’s in an electronic format.
Why Demat Account Is Important?
As an investor, you can keep your share documents in physical form safely, and there is a lot of chance of theft and forgery. So, the Demat Account is the best place where you can hold your all shares in electronic form. Also, you can track your shares with updated share values.
Using Demat Account you can transfer bonds, and securities immediately in a safer manner. The Demat Account is the safest and best place where you can trade in the share market digitally.
How Does Demat Account Works?
Demat Account works like the usual physical trade method in the form of digitalization. Using the Demat account you can see the exact value of shares and the total no of available shares. With the help of a Demat Account, you can buy and sell your shares which can reflect immediately in your account.
There are three parties involved in the Demat account process—initially your bank account, secondary the depositary participant, and finally the depositary.
Depositary means the institute which can provide a platform for investors, In India there are two depositary institutions like National Securities Depositary Limited (NSDL), and the Central Security Depositary Limited (CSDL).
Depositary Participants means the intermediate or the broker which can provide the service between you and the depositary.
What Are The Types Of Demat Accounts?
Before opening a Demat Account you need to choose the right type of Demat Account which suits your profile. Most commonly there are four types of Demat Accounts available in India.
Basic Services Demat Account
The Basic Services Demat Account is introduced by SEBI in recent times to target new investors. This Demat account is free up to a limit of INR 50,000 and charges Rs.100 for INR 50,000- 2,00,000 holding value.
Regular Demat Account
This is the most used type of Demat Account in India. The Regular Demat Account is for Indian residents. You can purchase and sell your shares with the help of a Demat account.
Repatriable Demat Account
This type of Demat Account is for NRI people, those who want to invest in Indian Stock Market. If you want to open this Demat account first you need to open a regular Demat account in India then choose an NRI account to transfer payments.
Non-repatriable Demat Account
This is another type of Demat Account for NRI, using this Demat account you can trade in the stock market but it doesn’t have access to transfer the fund to foreign locations.
How To Open a Demat Account?
As per the Depositary Security Act 1996, it is compulsory to have a Demat Account for online trading in India. Let’s see the important documents required to open a Demat Account Online. You can open a Demat Account Online within 5 min to submit the following documents.
- PAN Card – This document is important for opening a Demat account in India.
- Address Proof – Any of the following documents you can submit for address proof ( Driving license, Voter ID, Adhar card)
- Photo – A Passport size photo is necessary
- Bank Proof – You can submit bank proof like a canceled cheque, passbook, or last 6-month statement.
- Income Proof – This will be required when you can do Future and Options trading in the stock market. You can submit a 6-month bank statement.
Benefits Of a Demat Account | Advantages Of a Demat Account
There will be more advantages of having a Demat Account for online trading, let’s see the advantages of having a Demat Account.
- Free Of Cost – You can open a Demat Account free of cost. And no stamp duty for the transfer of securities.
- Easy to access – Handle your Demat Account on your mobile phone or laptop to log in to your account.
- Safe & Secure – Demat Account is the most secure platform to transfer your bonds and shares digitally. Also, it can reduce the risk of loss, theft, and forgery.
- Quick service – It can immediately deliver your settlement and distribution of bonuses, dividend, etc.
- Easy Maintenance – You can easily set up your nominee, and transmission formalities in case of the death of an investor.
Disadvantages Of a Demat Account
Before the Demat account method shares are physically stored by investors, so there will be a huge chance of stolen or missing files. Which can cause loss to investors. But after the Demat account is created all shares and bonds are stored in dematerialized electronic format.
Demat account gave a seamless performance to investors and easily you can buy or sell shares with the help of a Demat account. But it has some disadvantages you need to know.
The main disadvantage of having a Demat account it has annual charges. Many banks and brokerage services charge to maintain your account safely.
Demat account completely works online, you can log in to your account with the help of your mobile phone and laptop. If those who can’t able to operate the mobile phone or can’t able to access the internet they can’t operate a Demat account.
Trading on High Frequency
This Demat Account or dematerialization of shares is simplified the stock market and trading transactions. You can buy or sell any stock with a single click. In order to do that many investors take quick actions to buy or sell their shares, due to that they can’t able to take full advantage of long-term gains.
Stockbrokers have the capability to run a business in the stock market, so always you need to check your Demat account stockbroker’s functions.
Important Factors To Choose A Best Demat Account
There are a lot of brokerages giving services to Demat Accounts, before opening your Demat account make sure the below points are provided by your stockbroker.
- Seamless service
- Less Annual & Maintain Charges
- Demat & Trading account in a single brokerage platform
- Depositary service provider in the same portal
- Do a ground reality check on the Depositary with your stockbroker history.
Best Demat Accounts In India
These are the following best Demat Accounts In India as per the current record.
- Angle Broking
- ICICI Direct Demat Account
- Sharekhan Demat Account
- IIFL Demat Account
- Motilal Oswal Demat Account
- HDFC Securities Demat Account
- SBICAP Securities Demat Account
- Kotak Securities Demat Account
- Religare Demat Account
- Axis Direct Demat Account
- SAS Online
These are the best 15 Demat Account Providers In India.
Is Open a Demat Account Free?
Yes, you can open a Demat account free of cost but have to pay AMC ( Annual Maintenance Charge ) to maintain your account for the bank. Anyway, some of the banks are providing lifetime free AMC charges to open a Demat Account. Here is the list of banks that offers free Demat Account.
- Zerodha Free Demat Account
- Upstox Free Demat Account
- 5Paisa Free Demat Account
- FYERS Free Demat Account
- IIFL Free Demat Account
- Angle Broking Free Demat Account
- Sharekhan Free Demat Account
Demat Account Charges
Demat Account gives you the most secure and convenient platform where you can access your shares and do trade actions online. Before opening a new Demat Account you need to know the various charges for Demat Account.
- Demat Account Opening Charges
- Demat Account Maintain Charges
- Demat Transaction Charges
- Demat Account Safety Charges
- Dematerialized and Rematerialized Charges.
- Demat Account Closing Charges.
These charges differ for each Demat account provider. So, before opening a Demat account compare with every bank.
Is Demat Account And Trading Account Are Same?
No, Demat Account and Trading Account are not the same. As an investor, if you want to buy shares in the stock market you need both a Demat account and a trading account. These two accounts are provided by the same stockbroker. A Demat account is the place where you can hold your securities in dematerialized form. But the Trading account is the intermediatory between Demat Account and the investor bank account.
Demat Account Vs Trading Account
Is a Demat Account Necessary For Mutual Funds?
As an Investor, you don’t require to need a Demat Account to buy Mutual Funds Shares. But Demat Account provides you with a safe place to store your securities in dematerialized form. You can buy Mutual Fund shares through Demat Account quickly and easily, otherwise, contact the company directly to purchase their Mutual Fund shares.
Demat Account For NRI
Many of us have a question about Is an NRI can Open a Demat Account In India. The answer is yes, NRI (Non-residential Indian) can Open a Demat Account In India and be able to trade in the stock market.
Also Read: How To Open A Demat Account For NRI
Also Read: Best Demat Account For NRI In India
Can a Minor Open A Demat Account?
Yes, minors can have a Demat Account in India, they can apply for a minor Demat account with the age below 18. You can easily open a Minor Demat account with any stockbroker to submit the necessary documents.
Demat Account is simply known as a dematerialized account, where you can hold your securities, bonds, shares, and ETFs in electronic form. I hope this article speaks clearly about What is Demat Account, how to use a Demat account, the purpose of a Demat account, and its pros and corns.
I mentioned in a detailed manner to understand the new investor can easily understand the basics of a demat account and its operations. If you have any questions please comment below. And keep engaging with more articles on sharespricetarget.com
Is Demat Account Safe?
Yes, Demat Account is Safe to hold your securities, and bonds in electronic form.
Can a person Have Multiple Demat Accounts?
Yes, it’s fully legal to have multiple Demat Accounts for a single person.
Is a Demat Account Necessary For Mutual Funds?
No, you can buy Mutual Fund shares without Demat Account.
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