Most of you may have heard about the demat account. But, probably very few of you know what it actually means. Demat basically means Dematerialization. The sole purpose of opening this account is to help you hold securities in an electronic form, which was not the case in the past. During those times, holdings were in the physical form. Let’s learn what is the importance of demat account in this review.
In a simple sense, a demat account is just like a savings account which you have with your bank. The savings account is where you keep your hard-earned money and a demat account is where you keep your stocks.
Importance Of Demat Account and Online Trading
To an investor, a demat account is of great importance in several ways. Some of the importance are discussed below:
1. Much Safer in An Electronic Form: the physical form of stocks were quite difficult to maintain. There was always the possibility of the stock certificates getting lost. On the other hand, with the help of a demat account stocks are maintained in an electronic form which eliminates the chances of a loss.
Furthermore, there are strict regulations placed by regulatory bodies and exchanges such as SEBI, NSE, BSE, CDSL, NSDL etc. that make sure that the rules placed are taken care of.
2. Cannot Trade Without It: Another importance of demat account is the fact that you cannot trade in the stock market without it. Everything is electronic in this modern era. Thus, if you wish to either buy or sell shares of a company which is publicly listed, you need to have a demat account along with a trading account.
Although, if you just want to perform intraday trading in futures and options segment only, then you have this liberty of not having a demat account.
3. Can Keep Multiple Securities Under One Roof: You probably have separate investments in different financial products such as Mutual Funds, Equity, and Debt Securities, to name a few. Maintaining them in different places can be a confusing task.
With the help of a demat account, you can easily store them in the same account, which can make things much simpler for you.
And if you want to track any particular investment you have made, you just need to login to the same single account to get access to it. Simple to manage!
4. Extremely Safe: Gone are the days when online financial transactions were considered to be risky. In this modern era, numerous security measures are practised for all types of online monetary dealings. This is also true in terms of a demat account.
Due to the various layers of security and regulations associated with such accounts, the importance of demat account has gone up amongst investors.
5. Highly Convenient: Dealing with physical stocks would mean visiting your broker every time you wished to trade. It would be highly inconvenient for you. Since the advent of electronic forms of stocks, life has become very simple and convenient for investors.
Whenever you wish to trade in the share market, all you need to do is turn to your demat account and go ahead with your trading.
6. Flexible Workplace: Another great importance of demat account is the flexibility it offers when it comes to trading. You can easily trade-in your demat account from your handheld or your computer.
There is no need for you to sit in front of a computer every time you wished to trade. You may also buy and sell while on the move. In other words, there are so many high-performance demat apps that you can use to place online trades.
7. Odd Lots Allowed: If you want to transact a single share with either a buy or a sell trade, it was not possible when physical shares were around. However, with dematerialization done, you can place orders even for such odd lot units for your trades.
8. Relatively Cheaper: One of the top advantages that take the importance of demat account to a different level is that it is economical as well. There are multiple additional charges levied such as handling charges when shares are to be physically managed by the stockbrokers.
Furthermore, such costs increase with an increase in your holdings, thereby, eating up your profits. With a demat account, it feels lighter to your pocket too.
Although opening a demat account requires a lot of documents, it is still worth the convenience and benefits it offers you.