Investors started using Demat accounts for trading from 1996 in India and before that securities and bonds were issued in physical form. The Demat account allowed them to hold the certificates of their securities in electronic form. If you are still confused about what is Demat account then you can think of it as a bank account but instead of money, you store all the important documents and certificates of different types of investments like mutual funds, stocks, bonds, NCDs, etc. in it.
Here are some of the key advantages of a Demat account:
Securities that are in physical form can be damaged, stolen, or lost. Also, the possibility of producing fake or forged documents cannot be denied. These risks get negated when you use a Demat account for trading as the securities are stored in electronic form.
It is convenient to hold the securities in a Demat account because you don’t have to worry about its storage or maintenance. Moreover, there is no need to store or carry them separately while trading as securities can be brought, transferred, or sold online.
– Can hold a wide range of products
A Demat account enables you to consolidate all your investments in one place. Equities, mutual funds, bonds, etc. can be held in a Demat account. This makes tracking of investments easy for you as you can monitor all your instruments via this account.
– Saves money
Physical certificates and documents require additional storage space and you will need to spend some money to maintain them over a period of time. Also, you need to pay for charges like courier charges, stamp duty, etc. while engaging in trade using physical securities. All these costs got eliminated with the introduction of a Demat account.
– Saves time
Buying physical securities in bulk is cumbersome as you will have to verify multiple certificates and indulge in a lot of paperwork for that. The securities can be bought and sold quickly through a Demat account as everything is done online. Also, there is no paperwork required to complete the formalities as every transaction gets executed digitally through your Demat and trading account.
– Easy access
You can access a Demat account by using different devices like smartphones, laptops, tablets, etc. since all you need is a device that facilitates internet connection.
– Dematerialization and rematerialization
If you want to convert your physical securities in electronic form then you can do it with the help of your depository partner. Similarly, electronic certificates can be converted back into physical form whenever you require them.
If you are thinking how to open Demat account online then don’t worry as you can contact one of the depository partners, also known as brokers, who are registered with NSDL or CDSL. Depository partners will help you in the entire process and you can open a Demat account online by filling up an online form provided on their respective portals. Choosing the right depository partner who doesn’t charge a huge brokerage and enables you to mitigate risks by investing in multiple products is essential for making profits in the future.
Disclaimer: Investments in the securities market are subject to market risk, read all the related documents carefully before investing.