Do's and Don'ts For a Demat Account
The dematerialisation of shares and the advent of electronic trading has enabled the participation of investors from different strata of society. The stocks markets were a den of investors from large cities as the information and the logistics required to trade in the equity markets was not available for a large section of the population. The penetration of the internet has made it possible to access information and open a demat account from anywhere in the country.
A demat account is mandatory to invest in many segments of the stock markets. However, every positive change has a negative side too. An overt reliance on technology coupled with low financial literacy in the country has left many investors vulnerable to financial frauds and mismanagement. A simple set of do’s and don’ts can help you take care of your demat account. It is, however, important to discuss the safety of electronic trading before moving to dos and don’ts.
A trading account and demat account are mandatory to invest in the stock markets. The trading account is managed by the depository participant. It acts as an interface between the investors and the stock exchanges. However, after you buy the shares of a company, it is stored in the demat account. When you sell your holdings, the securities are transferred directly to the buyer’s demat account. The demat account is managed by depositories like CDSL and NSDL, which are backed by large financial institutions. Depositories hold the securities securely and protect investors from frauds and financial irregularities of different service providers.
Even though your securities are safe in the demat account, an investor should remain vigilant. Here are some crucial dos and don’ts you should ensure after demat account opening.