Most of us are interested in investing in the stock market. We must have a Demat Account before investing in the stock market. What is an actual Demat
What is a Demat Account:
Most of us are interested in investing in the stock market. We must have a Demat Account before investing in the stock market. What is an actual Demat account? Let us know in detail how to open a Demat account.
We must have a Demat Account and a Trading Account to invest in the stock market. However, many people find it difficult to distinguish between a Demat account and a trading account. Now let us see what is a Demat account and a trading account? Let us know in detail how to open that account.
Trading Account in stock market
A trading account is an account that we use to buy or sell shares. Through this trading account, we can buy or sell shares at the desired price at any time. I will explain the trading account in detail in the next topic.
Demat Account
A Demat account is a tool used to store shares and securities in electronic format. How we hide money in the bank, as well as the account that hides the shares we have bought is called a Demat account. In this, all our shares are also stored in electronic form. This account can hold not only our shares but also bonds, mutual funds, and government securities. According to your convenience and comfort, it also allows you to trade on the stock market. Also, online trading transactions can be done easily. It saves time for traders.No more fears of theft and forgery. If companies announce bonuses, splits, etc., the shares you owe, etc. will be automatically credited to your account.
In the old days, we would have to keep all the papers, forms, and certificates related to any shares naughty. But now the whole process is going digitally without any such papers through this Demat account. All our shares are also stored in the Demat account.
That is to say simply, we buy and sell shares through a trading account. The shares so purchased will be in electronic form in the Demat account.
If you want to open a Demat and a trading account you do not need to open both separately. Both can be opened simultaneously.
Depositories ...
In India, these Demat account services are provided by depository companies such as National Securities Depository (NSDL) and Central Depository Services (CDSL). Intermediate firms, depository participants, or stockbrokers make these services available to clients. Each intermediary company charges a specific Demat fee for this. Terms of contract between stockbroker, depository, type of subscription, shares in the account...These charges vary depending on the size of the securities and so on.
Dematerialization ...
Dematerialization is the process of converting shares in the form of physical certificates into electronic format. This eliminates the problem of having to hide paper certificates securely. Also, it helps to make these shares available to us anywhere in the world. Investors who want to trade online must have three main accounts. One is a bank account, the other is a Demat account and the third is a trading account. A Demat account has to be taken from the Depository Participant (DP). In it, you can store the shares you bought, etc. A trading account is required to handle transactions such as buying and selling. A trading account allows you to invest in a variety of investment instruments such as stocks, commodities, derivatives, e-gold, etc. If it is difficult to maintain three separate accounts for trading. Some companies also offer a three-in-one account. This will make trading and investing easier.
Features of Demat account
1.Secure Transfers - Before the existence of Demat accounts, the shares must be sent to the Registrar for transfer to the company or in the name of the investor. It will take a long time for the deal to be completed. But a Demat account allows you to transfer shares immediately without waiting time.
2.Faster Processes - Ever since the advent of a Demat account the process of converting physical shares into electronic form has become faster and hassle-free.Similarly, electronic securities can also be converted to physical form if required, without any delay.
3.Speed e-facility - According to National Securities Depository Limited (NSDL), you can send instruction slips electronically instead of submitting physical slips to the DP.This reduces the waiting time and makes the whole process easier and faster.
4.Corporate Benefits - When you have a Demat account, all the profits from your investments are automatically credited to your Demat account. These benefits are available to you as Demat account holders if the company you are investing in pays dividends, returns, or interest to their investors.
advantages of Demat account IN INDIA
Everyone who has a basic understanding of investments knows about trading account and Demat account. A Demat is a digital account that allows investments to be made in electronic form. However, there are some misconceptions about Demat. As a result, many people are reluctant to open a Demat account. In this context, let us know the benefits of a Demat account.
* Documents related to investment instruments such as shares, mutual funds, derivatives, and commodities can be secured online.
* Certificates in paper form can be converted into electronic form. I.e. can be dematerialized.
* Due to the address in the Demat account, there is no need to update the details everywhere when changing house.
* You can receive short messages to the registered mobile number regarding transactions handled through the Demat account.
* Mutual fund units can be purchased online if demated.
* Banks lend on shares, bonds, debentures, and mutual fund units in a Demat account.
* If you have this account, you do not have to worry about your certificates being stolen or lost.
How Demat account works:
When you buy shares, the broker holds your shares, and these Demat account credits are reflected in the statement. You are trading on an internet platform so you can view your holdings online. Usually, the broker trusts the shares as T +2, followed by the trading day +2 days.
If you ever want to sell shares, you need to fill in the various stock details and give the delivery instruction note to your broker. After debiting your account shares then you will be paid for the shares sold.
Similarly, if you trade online through the internet, the shares will be debited automatically and the money will be credited to your accounts.
Uses of opening a Demat account:
There is no need to keep shares in physical forms.
One share of the shares can be traded.
There is no stamp duty on the transfer number.
No transfer document is required.
Ingredients for opening a Demat account:
1. Age should be above 18 years.
2. Bank account details
3. Aadhaar card number
4. PAN card number
I will explain in the next topic how to open a Demat account
Things to consider before opening a Demat account:
We have to pay some brokerage charges every time we buy or sell shares. However, some brokerage companies charge a little more. So we can save a lot in the future by opening an account to see which brokerage company will charge less. It is also a good idea to have a Demat account with a good and reputable brokerage firm.
$There are many brokerage companies in our country like Zerodha, Upstox, Angel Broking, ICICI Direct. Of these, Zerodha is the most reliable and low-brokerage company.
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