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Have A Demat Account? Look For These Four Things To Avoid Losses!

18 Feb 2021 0 COMMENT

Financial markets have the power to make you wealthy with minimal participation. Zillions are trying their luck here every day, multiplying their money, day after day, through trading and investments. But how do you start your journey here? How do you enter these financial markets? One of the key eligibility criteria to set your foot in this haven is ownership of a Demat account.

What is a Demat Account?

Dematerialized or Demat accounts are those accounts wherein you can hold all your market securities in electronic form. A Demat account is rightly known as the passport that enables you to invest in the Indian stock market. Investors need Demat and trading accounts to hold and execute market trades, respectively. These accounts make the process of investing both convenient and straightforward.

Additional Read: What is Demat Account, its Meaning, Type, and Process

How does a Demat Account Work?

The working of a Demat account is similar to that of a Bank account. Demat account stores your financial market securities digitally, just like a bank account stores your money in electronic form. A Demat account is linked to your bank account. When you want to buy any financial security, the funds required to purchase it, get debited from your bank account, and the said security gets credited to your Demat account. Conversely, a sale of security means a debit of the said security from your Demat account and a consequent credit of the security’s sale value in your bank account.

Additional Read: Know How to Change Name in Demat Account

You can open a Demat account with or without an account opening charge depending on your registered broker. But every Demat account includes some associated service charges that are levied on you when you trade securities. Hence, as a trader, you must exercise due diligence while operating your account.

If you already have a Demat account, here are four things you can do to avoid any losses.

Validate the credit of securities into your account regularly

Each time you purchase any securities, the instruments are credited into your Demat account. It typically takes two working days after you've executed the trade (known technically as T+2 days) for the securities to be credited into your Demat account. As such, you must ensure that the shares are credited into your account, two working days after the trade is executed. However, you should know that sometimes it takes more than two working days, for instance, in the event of an auction owing to the short delivery. In such a case, you need to confirm with your DP about the date when the securities will be credited into your account and follow up with the same.

Understand the risk of keeping your shares in the pooled account

Sometimes traders ask stockbrokers to hold shares in the pooled account so that they can save on some Demat transaction charges. As such, it is integral that you get the shares credited to your Demat account first. It will safeguard you from any unauthorized transaction in your shares.

Consider the costs associated with holding multiple Demat accounts

Brokers typically advertise free Demat accounts to acquire customers. However, they levy several charges once the account is opened. For instance, account holders have to pay annual account maintenance fees. They are also charged sell transaction charges each time shares are debited from the Demat account. As such, it is better to avoid holding multiple Demat accounts. If you wish to open more than one Demat account, try to restrict yourself as per your actual need. Your costs of maintenance can increase with every Demat account you own. You can opt for a Basic Services Demat account, especially if the value of your investment portfolio is less than ₹200,000.

Additional Read: Checklist of Demat Account Charges and Fees

Avoid leaving signed DIS leaves with your broker

The Demat account comes with a Debit Instruction Slip (DIS) booklet. This booklet is like a cheque book on which you need to enter the details of the shares you want to sell. Many investors often leave this DIS booklet with signed leaves with their brokers. However, this act could result in acute consequences, especially if the booklet falls into the wrong hands. Instead of leaving the DIS booklet with your broker, you should sign the leaflet on a need basis.

Conclusion

While handling your Demat account, think of it as your savings bank account. The account holds all your securities or sharemarket assets in electronic format. As such, it is always better to exercise caution and remember the points mentioned above while operating your Demat account.

Disclaimer

ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.