Demat Account - A license to drive in the world of Stock Trading
A dematerialized or demat account is a facility that allows investors to hold shares in an electronic format. It is similar to a bank account, where you keep your money. Demat account holds the certificates of your financial instruments like shares, bonds, government securities, mutual funds and exchange traded funds (ETFs). Today, opening a demat account has become a basic need without which you’re unable to trade in the market. It’s as good as a license to drive into the crazy world of Stock market. The article will you inform you the procedure to open a Demat Account, flexible ways to operate and benefits of it.
The article will give an insight on how to open the demat account, flexible options and its benefits
To open a Demat Account you need to approach Depository Participants or DPs who could be banks, brokers or financial institutions that are empowered to offer demat services for trading. Download or collect the account opening forms from the respective DP’s office or website. Fill up the requested details in the account opening form and provide the necessary signatures. Affix photographs and submit a copy of PAN Card, proof of address, bank statement or other documents as required by the company. Once applied, you’ll be given a copy of the rules and regulation, terms of the agreement and the charges incurred for regular maintenance of your demat account. Depository Participants fees are based on the kind of transaction (buying or selling) that you perform. While some DPs charge a flat fee per transaction, others peg the fee to the transaction value, and are subject to a minimum amount. DP also charges a fee for converting the shares from the physical to the electronic form or vice-versa. Once the application is processed, the DP will provide you with an account number or client ID. You can use the details to access your demat account online. Every time you call for a trade you need to provide the client ID to the DP for further execution of orders.
Various financial institutions offer flexible options such as to open a Demat Account as well as trading accounts either independently or at the same time. This is called a two-in-one account. While some offer the three-in-one account option – demat, trading as well as a bank account. This means, you don’t have to open three separate accounts, instead you can trade on a single application form. The advantage is that you don’t have to manually keep transferring money to your trading account from your bank account.
Some Benefits of DEMAT Account
- Fact that you don’t need to hold securities in physical form rather they are kept in electronic form eliminates the risks of losing shares due to theft, fire, flood and other natural calamities
- You can instantly transfer stocks from one account to another which seems the whole process of buying and selling look easy, fast, efficient and effective in the stock market trading
- Dematerialization comes as your one stop shop of equity shares, mutual funds and IPOs etc. under a single umbrella
- Saving of extra costs incurred on stamp duty while transferring the securities
- Instant advantages of the split, merging and consolidated shares being credited automatically to your Demat account
- There are no restrictions on transactions. As a Demat account holder, one can sell or buy even a single share, which makes very difficult if the securities are in physical form. This is because; physical shares are stacked together collectively whereas Demat shares are easily divisible electronically
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