Why Demat Account is Must for Todays Investor
Banks in India are making sure to provide essential services to every corner of the country. Seeing this and the fact that the Indian market is an open opportunity for earning money for every young professional, student or experienced businessperson, banks brought a Demat account under the purview of essential banking services over time.
A dematerialized or Demat account allows you to manage and hold your securities and shares electronically. It is the primary requirement for trading in the market. As time moved forward, the shares also changed from certificates to electronic figures reflected in Demat accounts. This made the Demat account and trading account a compulsion for investors to enter securities trading. A Demat account holds various securities like mutual funds, government securities, ETFs, and equity shares. Whereas, a trading account is for placing an order and for the trading of financial instruments.
Shares in the Demat account stay safe and can be transferred effortlessly when required. Online trading would facilitate you to trade directly in the stock market and actively participate in Exchanges via online platforms. Besides, SEBI has also made it compulsory for all investors to begin their investment journey only when they have a Demat account online. This was with an intention to make it easy to trade. Before this, the investors needed a lot of time and effort in investing in the share market. The process went through hiring and consulting a broker to spot the best deals, complete all purchase-related formalities manually, and then wait for delivery of physical shares certificate. In comparison, a Demat account is a hassle-free option proven by the figures that say that nearly 40.8 million demat accounts were opened in India during 2019-20.
Opening Demat accounts help in removing trade barriers with ease of accessibility and quick share transfers. You are not mandated to rely on brokers or sub-brokers for carrying out the trades. All that’s needed now is to consult a well-reputed Depository Participant and open a Demat account. The shares held in the Demat account can be pledged as collateral for a personal loan from a bank. The best part here is that there is no need to hand over the share certificates to the bank physically. Most of the banks offer 1 lakh to 25 lakhs as a loan amount against the shares in the Demat account.
Owning a Demat account saves on stamp duty on the agreements between Depository Participant and you. This, in turn, saves cost on dealings and registration. There are no geographical or security barriers in operating through a Demat account. The account comes with multiple accessing options which can be operated electronically. This makes it possible to sell, buy and monitor shares from anywhere. Dealing in odd lots is possible with the introduction of the Demat account. Earlier it was impossible to deal with a single security or odd lots.
The importance of a Demat account expands more than what looks like an appropriate emphasis when discussing markets today. Demat account is fuss-free and a must for entering better financial planning, which answers the question asking for the relevance and importance of the Demat account.
Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. PThe contents herein above shall not be considered as an invitation or persuasion to trade or invest. Investments in securities market are subject to market risks, read all the related documents carefully before investing. 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 are solely for informational and educational purpose.