Importance of Demat account

Data released by India’s two premier depository firms — the National Security Depository Limited (NSDL) and the Central Depository Limited (CDL) — reveals that the total number of Demat accounts in India crossed 100 million in August 2022. It’s the first instance in the history of India that such a milestone has been achieved. A Demat account has many advantages over investing in paper securities, making it the preferred choice for many investors.

"A Demat account holds your investments in an electronically-readable format."

The primary advantage of a Demat account is that it instantly transfers securities from one person to another without any paperwork.

For example, let’s say you want to buy shares of Reliance Industries Ltd. (RIL). The moment you place the order through your broker, the shares are electronically transferred from the seller’s Demat account into your Demat account. Similarly, when you want to sell RIL shares, they are moved out of your account into the buyer’s account.

This system reduces the chances of fraud and delays expected in the previous paper-based system, where certificates had to be physically moved around.

It also does away with the need to pay stamp duty on the transfer of securities, which was applicable in the case of physical certificates.

Why is a Demat account required?

A Demat account is required to trade in shares electronically. This account holds securities in an electronic form and dematerialises them. Without a Demat account, an investor cannot trade in the stock market.

Why an electronic format?

Experts say that a Demat account is of high significance to investors because it:

  1. Maintains a record of all transactions
  2. Reduces paperwork
  3. Provides easy liquidity
  4. Facilitates faster and easier transactions
  5. Offers safe and secure storage of securities
  6. Eliminates the risk of forged or mutilated certificates
  7. Prevents delays in the transfer of securities

A Demat account is a convenient and secure way to manage your investments and is an essential tool for anyone who wants to stay on top of their finances. Industry experts suggest that every serious investor should have a Demat account to take advantage of its many benefits.

Advantages of a Demat account

It eliminates the need for paper certificates, which can be difficult to keep track of and are more prone to being lost or stolen.

  1. Having a Demat account makes buying and selling shares easier since the process is done electronically.
  2. A Demat account gives you more control over your investments. You can choose to hold onto your shares or sell them at any time without waiting for the physical process of buying and selling to be completed.

What kind of investments can be held in a Demat Account?

A Demat account holds your investments in electronic form. You can have various assets in a Demat account, including

  • stocks,
  • bonds,
  • mutual funds, and
  • ETFs.

One advantage of holding investments in a Demat account is that it simplifies buying and selling. For example, the proceeds are automatically deposited into your Demat & Trading account when you sell a stock. It makes it easy to track your investments and monitor your portfolio.

Is a DEMAT account necessary?

According to the Securities and Exchange Board of India (SEBI) guidelines, a Demat account is necessary to trade and invest in the stock markets.

Opening a Demat account?

Investors who want to hold company shares may do so by opening a Demat account with a SEBI-registered intermediary. Bajaj Financial Securities Limited is one such company. The process is simple and convenient, allowing investors to manage their portfolios quickly. Opening a Demat account with Bajaj Finserv has several benefits. For one, it helps streamline the process of buying and selling shares.

Is there a minimum balance amount required for shares or securities in my Demat account?

Technically, no minimum balance is required for shares or securities in a Demat account. However, from an investing perspective you should keep funds in your demat account so that you don’t miss an investing opportunity in the market. Brokers would not force you to keep your demat account funded however they will charge an annual maintenance fees or AMC to facilitate the transactions. Also, you must ensure that you keep investing at regular intervals as your demat account becomes dormant if no trading activity happens for long periods.

Overall, having a Demat account makes buying and selling securities much more straightforward, convenient, and efficient. So, if you're looking to invest in securities, open a demat account today.

Open Demat & Trading Account

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