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Demat account: An overview

A demat account comes with many benefits. You get to digitally trade in the stock market. Your documents remain safe, and there is little scope for fraudulent transactions. Overall, a demat account gives you a lot of advantages.

Why you need a demat account

There are some strong reasons for your opening a demat account . These are as follows:

Less chance of fraud:

The dematerialisation of securities reduces the chances of fraud. Your share certificates cannot get stolen. Signatures cannot be forged. These factors make it necessary for you to have a demat account.

Easy transfers:

In the past, one would need to send the shares to the Registrar of Companies and to the companies concerned as well. This was to initiate the transfer of the ownership of the stocks to your name. This was a tedious and time-consuming process. Besides, share certificates would often get lost in the process. With a demat account, the transfer happens online in an instant, eliminating all such problems.

No stamp duty:

It is cheaper to trade through a demat account since there is no stamp duty involved. In the past, you would be required to visit the stock exchanges in person to get your share certificates stamped. With dematerialisation, this is not the case anymore.

Odd-lot shares:

You can sell any number of shares, even if it is an odd lot. Earlier, odd-lot shares could not be sold because the job involved much effort. But with the introduction of the demat account, this is no longer a problem.

Single account: You can buy most debt instruments such as tax-free bonds and non-convertible debentures (NCDs) through one single account. You don’t need multiple demat accounts to trade in multiple debt instruments.

Read more: How to use a demat account

Who should have a demat account?

Anyone who wants to trade in the stock market should have a demat account. You can have a demat account individually, jointly with someone else, or on behalf of your company. There are various types of demat accounts. Explore your options and invest accordingly.

Whether you are a novice or a seasoned investor, using a demat account is important. You get to trade securely. There is a record of every transaction made. All this makes it remarkably simple and convenient for you to maintain your own financial records and access them whenever needed.

Read more: Uses of a demat account

Is having a demat account necessary?

Indeed, not having a demat account means losing out on many benefits. Here are some more points in support of this:

Correct type of assistance:

When you trade via a demat account, you get the assistance of a Depository Participant (DP). The DP is a trained and experienced agent. Not only does the DP guide you with your investments, but it also tells you how to go about the process.

Beneficial for companies:

The companies issuing the shares also benefit from demat accounts. A company can issue and sell stocks online. In the old days, the certificates had to be printed, distributed, stamped, etc. But now everything is available in the electronic format. This makes it very convenient for the companies as well.

Broker’s advantage:

Besides the investor and the company, the stock broker also benefits from using a demat account. There is less scope of fraud, loss of certificates, etc. This helps increase the confidence and credibility of the broker. This credibility, in turn, boosts the broker’s profit.

Read more: What is client ID in demat account?

Conclusion of Demat Account

The conclusion of Demat Account and the above points show just how useful a demat account is. You can open a demat account if you wish to trade safely and in a structured manner. Demat accounts benefit every entity in the value chain, including the investor, the stock-issuing company, and the broker. Choose a good brokerage house like Kotak Securities tyour demat account if you have not done so yet.

Read more: How to close a demat account

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