Demat Accounts: Revolutionizing the Way You Invest

Demat Accounts: Revolutionizing the Way You Invest

December 08, 2023

Gone are the days when investing meant handling physical shares and worrying about their safety and security. Demat accounts have brought about quite the change as they have replaced the conventional way of investing. With electronic is the way forward in this digitally-advanced era, why should investing be any different? In this article, we will deep dive into what is a demat account and how to open a demat account.
 

What is a Demat Account?

In simple terms, a Demat account (short for a dematerialized account) is an electronic account used for holding and transacting securities. In India, demat accounts came into force in the year 1996 and it has revolutionized the Indian Stock Market ever since. Before the advent of demat accounts, investors had to physically trade shares which made investing a tedious task. But with the dematerialization of shares, one can now trade shares electronically through their demat accounts
 

Apart from shares, a demat account can hold a variety of securities such as corporate bonds, mutual funds, government securities, etc. Once an investor buys securities, the same gets credited to the investor's demat account and thus is represented electronically. This eliminates the need to possess the physical shares, making the whole process simple and hassle-free.
 

How to Open a Demat Account?

Now that we know what a demat account is, let's delve into how to open demat account. There are a plethora of stockbrokers who provide brokerage services to open a demat account. Let’s see how to open a demat account with a broker:

Step 1: Choose a broker– The first step is to select a stockbroker. One can select a broker based on factors like the brokerage charged, platform design, research & development, and safety & security.

Step 2: Complete KYC- To open a demat account, one must complete the KYC (know your customer) process. KYC is a one-time process and is mandatory for all investors. Generally, the KYC documents required are a PAN card, Aadhar card, and address proof.

Step 3: Fill in the Application Form- After completing the KYC process, the applicant must fill in the application form for opening a demat account which is generally available on the broker's website.

Step 4: Submit the Application Form along with KYC documents – Once the application form is duly filled and signed, it needs to be submitted along with the KYC documents to complete the Demat account opening formalities.

Step 5: Account Activation – After the submission of the application form, the broker verifies the details and activates the demat account. The activation process may take up to 3-4 business days.
 

Cost-Structure of Demat Accounts:

Brokerages charge for providing services to their clients. One must check the brokerages charged for opening and maintaining a demat account. Generally, brokers charge a one-time fee for opening a demat account, which varies from broker to broker and may range from INR 200-1000. Similarly, there is an annual maintenance fee (AMC) that brokers charge to maintain the demat account. AMC varies from broker to broker and may range from INR 300-700.
 

Advantages of Demat accounts:

  1. · Reduced risk and hassle in holding and trading securities
  2. · Share movement in a smooth and paperless transaction
  3. · Reduced costs of transaction and minimal chances of frauds
  4. · No stamp duty charges for trading and transfer of securities
  5. · Easy accessibility and availability of market data


 

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