Conclusion of Demat Account
If you were to ask, ‘How to start investing?’ the answer would be, “Open a Demat account’. As the investing spectrum in India has entirely converted into the digital space, a Demat account has become vital for anyone who wants to become an investor and invest in the stock market. However, it is equally important to know the conclusion of the Demat account. before you open one and start on your journey of investing and multiplying your wealth.
This blog details the analysis and conclusion of the Demat account process, and its advantages and disadvantages deeply.
What is a Demat Account?
The first link in the chain of Demat account conclusion is to understand the significance of this account. A Demat account is used to hold the shares and securities of publicly traded companies in an electronic form. With a Demat account, you can hold various investments such as bonds, equity shares, government securities, mutual funds, and exchange-traded funds.
Similar to a bank account, a Demat account is either credited or debited each time you buy or sell shares of a company. It not only eliminates unnecessary paperwork but also helps streamline the process of share trading. All of the Demat accounts in India are maintained by two organizations, namely National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
How does a Demat account work?
The second link in the conclusion of the Demat account is knowing how the account works. Investors can buy stocks in the share market only through a trading account. Meanwhile, a Demat account is used to hold the shares bought through the trading account. Therefore, to realize the full potential of a Demat account, it is imperative to link it with a trading account. The following process will show you exactly how a Demat account works.
- When you place an order, say a ‘buy’ order, on your trading platform, your depository participant forwards a ‘buy’ request to the stock exchange.
- The stock exchange then matches your ‘buy’ request with a similar ‘sell’ request and sends an order to the clearance houses.
- The clearance houses then settle the trade by debiting the specific number of shares from the seller’s Demat account and crediting it to your account at the close of the share market.
Advantages of Demat Account
A Demat account comes with numerous benefits for the investors. Some of the most common benefits include:
- Dematerialization: Demat accounts overcome the necessity of holding physical share certificates and allow investors to hold all of their shares virtually. The shares can be accessed, bought, and sold online.
- Investing assistance: If you open a Demat account with an experienced stockbroker such as India Infoline, you can make informed investment decisions based on research-based market advice provided by IIFL’s experts.
- Hassle-free access: Similar to how you can access banking facilities online, you can handle and manage Demat account operations hassle-free, thereby allowing you to manage your investments effectively.
- Lower Costs: Unlike physical share certificates where the investors had to spend on stamp duties, handling charges, etc., a Demat account offers the facility of trading at a much lower cost. For example, IIFL offers a free Demat account with zero annual maintenance charges.
Disadvantages of Demat account
Although a Demat account is mandatory to start investing, it comes with some disadvantages:
- Tech Savvy: Handling Demat accounts is a tech-based process. As it comes with numerous digital features and requires knowledge of online tools, it can prove to be complex for people who are not familiar with digital technologies.
- High Frequency: Due to dematerialization, the frequency of trading in the stock market has risen tremendously. As investors can buy and sell shares instantly, it has created a habit of frequent trading, increasing the chances of losses.
- Annual Maintenance Charges: Most stockbrokers charge an annual fee, known as annual maintenance charges, for the facility of the Demat account. Although India Infoline’s Demat account comes with zero AMC, you can end up paying a hefty amount for a different stockbroker’s Demat account.
Conclusion of Demat account
Now that you know about the analysis and conclusion of a Demat account, go ahead and open a Demat account with IIFL. The account is designed to offer you numerous facilities such as a trader terminal, TT Iris, etc., that can help you trade better and maybe even become a pro trader. You can visit India Infoline’s website or download the ‘IIFL Markets app from the app store to open a Demat account.
Frequently Asked Questions Expand All
The main objective of a Demat account is to facilitate investing by offering a place where you can hold your bought shares and sell them whenever you want.
If you want to invest in the Indian stock market and buy various securities such as bonds, equity shares, government securities, mutual funds, and exchange-traded funds, it is mandatory to open a Demat account. Once opened, the account is used to hold these securities after you have bought them.
In addition to being an indispensable part of the share market, a Demat account is important for the following reasons:
- Swift settlements and deliveries
- Increases share trading volume and market participation
- Increases transparency
- Eliminates paperwork
- Quick and easy communication with investors
- Builds trust and increases investor confidence