Everything You Must Know About Demat Accounts
Investments and returns go hand-in-hand, provided you choose avenues that align with your financial objectives. Savings are significant, but assets for wealth creation leads to intelligent financial planning. There are specific instruments required for investing in the Indian stock market. Every investor should know the basics before selecting the appropriate asset.
Trading and Demat Accounts are essential for investing in the stock market today. Therefore, the Securities Exchange Board of India introduced them to digitise the stock purchases and documents. Dematerialisation of the Account refers to the conversion of physical shares into electronic ones. They work like bank accounts for ease of access and swift transactions during trading.
Each financial product offers a set of benefits to customers and encourages them to invest while promising the safety of funds. While the market turns digital, investments in the stock market are revolutionising with time.
With these Accounts, shareholders can escape paying transfer costs and other payments during the physical transaction of shares and securities. It also enables secure trade while maintaining confidentiality in investments.
Just like an electronic transfer of money from one bank account to another, electric shares and securities enable easy and instant trade with negligible paperwork. Additionally, it makes online trading a boon for investors and calculates the credit and debit of shares accurately.
You pay Demat account charges to the fund house before finalising the trade. It links your bank account to it, which means any profit or dividend the company you hold your shares with gets directly transferred to your bank account. No physical presence or hassles at the exchange or company’s office needed.
When you dematerialise your shares, you convert them from physical documents to e-papers. As a result, it becomes difficult for others to steal or modify them, including forging signatures or changing trade figures. Such features make these Accounts desirable and secure.
How to open it?
To open Demat accounts, you need to dematerialise your shares by approaching Depository Participants. They allow you to hold your securities in electronic format post verification. An important feature is that they act as a bridge between the company and the investors by maintaining the record of the securities owned by investors in a book-entry form.
Depository system advantages
The depository is an organisation maintaining the securities in an electronic form on behalf of investors. They do it with the help of a registered DP. The DP is an agent acting as a bridge between the depository system and the needs of investors.
Currently, there are two depositories in India registered with the SEBI – National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). It enables secure and hassle-free transactions of securities and dividend earnings.