Led by attractive returns on stock investments and convenient investing, there is an increase in the number of demat accounts – 10.8 crores in December 2022. It records a surge of 34% on a yearly basis.
Benefits of Demat Account
An online demat account transformed stock markets two decades ago. After 1996 when the demat account-based trading system was introduced, stock markets greatly expanded, and a wide range of securities are available for retail investors also. Have a closer look at the benefits of a demat account to invest in the stock market:
-
Invest in Multiple Securities using a Single Demat Account
The financial market offers a wide range of assets to make short-term or long-term investments to meet set goals. A demat account can hold multiple assets if the investor wants to reap benefits. It can be shares, bonds, mutual fund units, IPO (Initial Public Offering), government securities, etc. Invest and hold them in one place. There is no need to switch windows on a desktop or laptop to invest or track different financial assets. Access securities in the investment portfolio in one place. Investing is much easier with online trading apps of stockbrokers.
-
Fast Share Transfer
Demat-based trading systems take only two days after transaction day (T+2 days) to settle trade and transfer securities’ ownership. Now, stock exchanges can opt for a settlement period of T+1 day also.
-
Safety
The SEBI (Securities Exchange Board of India) monitors each and every transaction made in a demat account. Therefore, there is no need to worry about assets in a demat account. There are negligible stances of forgery or delays in the online trading system. Also, a demat account has eliminated the risk of loss, damage, or theft involved in holding physical securities.
-
Easy Dematerialisation
If someone holds old share certificates or gets them as a legal heir, they can dematerialise those shares easily by opening a demat account. Consider free demat account opening with a discount broker.
-
Easy Liquidation
Tradable securities, like shares, exchange-traded funds, etc., one held in a demat account can be sold digitally on stock exchanges conveniently. To trade assets on stock exchanges, one needs to access the online trading platform of the broker using a trading account.
-
Auto-credit of Corporate Benefits
Investors are entitled to receive various corporate benefits on their investments. Depending on the company’s policy, they can receive regular dividends. There can be right issues or split issues. Such corporate benefits are credited to the investor’s demat account automatically. Even if an investor has frozen the demat account for a certain period, these benefits will be credited to his/her demat account.
-
Pledge Demat Securities with Broker
Traders may find a profitable investment opportunity but have a shortage of funds to take a position in the market. In such cases, traders can utilise the Margin Trading Facility (MTF) with the broker by pledging shares in their demat accounts. The SEBI allows pledging demat shares against a trade made using MTF.
There are many other benefits also, like a solution to odd lot issues, getting a loan against demat shares from lending institutions, savings on investing costs, etc. Open a demat account to invest in the stock market with such benefits.
How to Open a Demat Account Online
Opening a demat account is much easier in this digital era following the e-KYC process. Choose a stockbroker registered with the SEBI to open a demat account online. For a free demat account, subscribe to a discount broker’s annual subscription plan. Steps to follow at the broker’s official website are as follows:
- Step 1: Refer to its official website and hit the ‘Apply for Demat Account’ button.
- Step 2: Enter the personal details of the applicant – full name, city, mobile number, and email ID. Ensure that the entered mobile number is active and Aadhaar-linked to receive the OTP (one time password) for e-KYC (Know Your Customer).
- Step 3: Upload documents – scanned copies of the applicant’s documents – PAN (Permanent Account Number), identity proof, and address proof.
- Step 4: Complete an In-Person Verification (IPV) process using a webcam or a smartphone. One can schedule a video call or record a self-declaration form to complete the verification process.
- Step 4: e-Sign the online demat account opening form using the OTP received on an Aadhaar-linked registered mobile number.
- Step 5: Submit the application for details and document verification.
The broker will verify the details and provide the demat account login credentials after a successful verification process.
Now, investors can research stocks and start investing using the activated demat account. Gain adequate market knowledge before employing funds in the stock market investment. Investors should have to go through the stock market investment and gain some basic knowledge. They have to do research about the shares before buying or selling them.
Read also: A Beginner’s Guide To Online Trading: Tips And Tricks For First-Time Traders
