What are the features of a Demat account?

by Pankhudi Dave Head Finance Manager

A demat account is similar to a bank account, as an individual can hold their securities, shares, debentures, bonds and mutual funds etc. instead of money. it acts as an alternative for holding securities in the form of physical certificates. While online trading, an individual can use the demat account for holding the securities which they buy. Any first-time investor should first understand the demat account definition before beginning to invest.

Some of the features of a Demat account are:

1.    The transactions costs are lower when dealing with the physical counterparts.
2.    An investor will not have to worry about the safety of the shares, bonds and debentures. They are secure in a demat account.
3.    An investor can sell as many shares as they want, even one is okay whenever they want.
4.    With a demat account, it becomes easy and simple for an investor to invest in securities online.
5.    Electronic settlements are super easy and convenient with a demat account.
6.    Physical certificates come with the risks like theft, fake certificates, forgery, bad delivery, transfer delays etc. A demat account will eliminate all the threats.

7. Transferring the securities become fast, thanks to the reduced paperwork.

When it comes to demat account introduction, there are two terms that an individual will need to understand, depositories and depository participants (DPs).

When it comes to the question of how to open a demat account, an investor will need to follow some basic steps. The steps for opening a demat account are listed below:

1.    Choose a depository participant (a depository participant can be financial organization like banks, brokers, financial institutions, custodians etc. acting as an agent of the depository for making the services available for investors)
2.    Fill up the account opening form provided and submit the necessary documents
3.    The depository participant will conduct an in-person verification
4.    Once they are verified, the DP will provide the investor with a unique account number or ID, an individual can use this to access the online demat account.

5. Once they are verified, the DP will be able to provide the investor with a unique account number or a ID. An individual can use this to access their online demat account.

Whenever an individual opens a demat account they should always add a beneficiary. It generally takes a week or two to open a demat account. However, the advantage about opening a demat account is that an individual can open multiple accounts with different depository participants and there is no minimum share balance required for opening a demat account.

After understanding the demat account definition, and its functioning, it is important for an investor to know about the stock trading and its benefits. A lot of people perceive stock market as a game of cards and buy and sell shares according to the intuition. Investing in stock market is like a game where an individual can buy and sell shares according to their intuition.