Understanding Demat Account and the Reasons for Opening One
by Pankhudi Dave Head Finance ManagerYour bank account is used to hold your money safely for an extended period. Now, when you put that money to use by investing in shares, you need something to hold those shares for you. It is here that the Demat account works for you. It keeps your equities (that you have purchased) and enables the process of stock trading. In a way, you can draw a similarity between your bank account that safeguards your money and the Demat account that protects your shares.
A Demat account (also known as a dematerialisation account) is required to hold your shares/stocks, securities, etc. in an electronic form. These could either be directly bought online or converted from paper form (physical) to electronic form. All your different online certificates of various financial instruments (such as equities, ETFs, bonds, mutual funds) are held in a single place known as the Demat account, that provides anytime, anywhere access to these.
Why Should You Open a Demat Account?
With a Demat account, you can get rid of the lengthy process of buying paper shares and the subsequent paperwork, thereby saving a lot of time for you.
You can buy new shares directly in electronic format or convert your existing paper shares into electronic form (dematerialisation) and store them in the Demat account.
Your Demat account equips you to access your shares from anywhere and settle your trades online from your smartphone, laptop, PC, etc.
Benefits of a Demat Account
With a Demat account, you can store/manage your purchased shares, mutual funds, government securities & bonds, NCDs, and more, at a single location online.
If any company announces any dividend, share split/bonus, etc., your Demat account gets instantly credited with the corresponding shares/amount. Similarly, when you complete any stock transaction, you get the transfer of shares/securities reflected in your Demat account automatically. The Demat account helps in all these by being conclusively linked to your trading account and your bank account.
A Demat account empowers you to regularly monitor and keep track of your investments in different financial instruments like mutual funds, gold ETFs, derivatives, equities, bonds, etc. You are also able to receive LIVE updates from the market, customised alerts/notifications, investment analysis, stock recommendations, etc. and take informed decisions.
From the Demat account information discussed above, you can conclude that is a highly effective medium that enables you to easily access, track, and hold your shares as well as securities. It ensures the safety and security of your investments, just like how the bank account safeguards your money.
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Created on Apr 13th 2020 05:20. Viewed 365 times.
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