Demat Account Opening-Things To Know
In 2010, India saw growing popularity of online stock trade. Gradually, it replaced stock trade in physical form like security certificates. They consumed enough time and money especially on transaction costs.
The concept of online stock trade heralded as “DP account” also known as dematerialization (demat) account. Its introduction came in 2000.
Still caught by the soreness-
There still exists small faction of people storing securities in the form of physical certificates. They don’t use or trust online stock trade method despite the convenience of the latter.
The reasons can be many and vary across investors. The main reason is ignorance towards the perks of Demat account opening and beginning with online stock trade.
Some even are dismal on the intricacies related to demat account opening and further trading online. However, what they don’t realize is it is way easier and convenient than physical storing of securities.
Demat account means Dematerialized account. It favors storing and trading of securities electronically unlike storing them in physical form.
The process can be affiliated with the working of bank accounts.
People use savings bank account to deposit and withdraw money. In the same manner, demat account is used for withdrawing and depositing stocks as well as bonds, NSCs and debentures.
It involves a process of selling and buying of the shares online. After demat account opening, the former process of selling and buying of shares gets adjusted in the demat account.
Depository participant (DP)
DP or depository participant periodically provides you with statements of personal holdings and transactions. This relates to bank passbook or a statement.
Demat account Opening is a compulsion for everyone who want to invest and trade in Indian stock market. This is mandated by SEBI which is the supreme Indian market regulator. Therefore, it is important to register demat account opening with SEBI-registered DP (Depository Participant).
Demat Account Opening | Beneficial Factors
- No risk of theft- Certain risk of theft or harm lingers when storing physical certificates of bonds and shares. A person also experiences delayed deliveries. He may also find delivery of fake securities and other documents. All these lacunas are fulfilled when opting for online stock trade. Apart from that, it ensures long-term safety for your investments.
- Freedom from cumbersome- Expediency a.k.a convenience is also an added advantage when you trade with the help of a demat account. Whether it is to sell your dematerialized shares or to redeem your debentures, both can be carried out conveniently with the help of electronic transfers. This relieves you form the troubles of transfer forms and redemption requests as well as anything related to cumbersome paper work.
- Ease of trading all types of investments like shares, bonds and debentures as well as futures and options online.
- Computerized credit of proceeds get relocated to your personal account
- You receive direct credit of all the dividends and interests transferred to your associated bank account
- Automated occurrence of events like rights or bonus or merger
- Facility of online trading as well as transfer of share