Share Of Demat Account
Share Of Demat Account
A Demat Account, short for Dematerialized Account, is an electronic account used to hold
financial securities such as shares, bonds, mutual funds, and ETFs in digital form. Much
like a bank account holds money, a Demat account securely stores your investments,
eliminating the need for physical share certificates. This not only enhances safety but
also reduces the risks of loss, theft, or damage to certificates.
One of the major benefits of a Demat account is the convenience it offers in buying,
selling, and transferring securities quickly and efficiently. It simplifies
record-keeping and provides easy access to your portfolio through online platforms.
Additionally, corporate benefits like dividends, bonuses, and rights issues are directly
credited to the account.
With features like nomination facility, account freezing/unfreezing, and seamless
integration with trading and bank accounts, a Demat account is essential for anyone
looking to invest in the stock market or capital markets in India.
Key Benefits of a Demat Account
Risk-Free Holding of Assets:
With a Demat account, shares and other securities such as bonds, mutual funds, ETFs and government securities can be stored in electronic form. This eliminates the traditional problems associated with physical certificates such as loss, theft, damage or devaluation.
Streamlined Transaction Processing:
Securities held within a Demat account can be effortlessly bought or sold through the stock exchange. The shares get transferred in and out of your Demat account as part of these transactions, which is a lot simpler compared to the process involving physical share certificates.
Enhanced Security for Share Transfer:
There is greater efficiency and protection in share transfers, as electronic transactions replace traditional methods. Transactions are completed within a few days thus guaranteeing speedy transfer of ownership.
Lower Costs Than Before:
A Demat account is more cost-effective than managing physical shares because there are no expenses related to stamp duty, storage, or security. However, there may be maintenance and transaction fees set by the provider.
Simplicity:
A key advantage of a Demat account is that it can be accessed online. This allows a user to view securities, conduct transactions, and manage their investments from anywhere at any time.
Reduced Risks:
A Demat account guards against unauthorized access, thus guarding against theft and destruction of securities. This provides greater protection than physical certificates which can be lost or damaged.
Steps to Opening a Demat Account:
Select a Depository Participant (DP):
A Demat account can be opened with a DP which could be a bank, brokerage, or a financial institution that is affiliated to a depository (NSDL or CDSL).
Complete KYC Formalities:
Opening an account requires the submission of KYC documents which may include identity proof, address proof, PAN card, and bank account information.
Sign the Contract:
You will need to sign an agreement with your DP which sets forth the terms and conditions governing your Demat account.
Get Your Demat Account Information:
After the account is created, you shall receive your Demat account number which can be used to
purchase or sell securities.
Ownership of a company’s stock that you have purchased is held in electronic form Shares in a
Demat Account. If you buy shares through a stockbroker or broker, dump them into your demat
account.
Apart from equity shares, you can also hold preference shares, mutual funds, government
securities and bonds in your demat account.
Advantages of Keeping Shares in a Demat Account:
1.Safety and Security:
Eliminates risks associated with physical certificates.
2. Convenience:
Easy access and management of holdings through the internet.
3. Quick Settlements:
Efficient processing of stock market transactions.
4. Low Costs:
No fees for necessitating paperwork.
6. Change of Ownership:
Effortless exchange of securities between sellers and buyers.
7. Redemption:
Shares in a Demat account can be used for loans as collateral.
In summary, to trade or invest in the stock market, Demat Account is a prerequisite as it enables one to manage financial assets securely, efficiently and at low cost.
Frequently Asked Questions