What are the Benefits of Opening a Demat Account
Investing your money in profitable financial instruments is essential to building your wealth, and the stock market is one such avenue. Considered one of the key markers of a robust and growing economy, stock markets offer investors a wide range of choices across asset classes and industries. You can start investing in the stock market in India by opening a demat and trading account. In this article, we shall delve into
- What is a demat account
- Major benefits of opening a demat account
What is a Demat Account?
A demat account is a digital account designed to store the securities purchased by its holder from the stock market. When you place buy orders in the market, the securities thus purchased get transferred to your demat account linked to your trading account (after the applicable settlement cycle has elapsed). With an online demat account, the process of stock trading has become easier to access and monitor.
You can submit a demat account application with any authorised depository participant (DP) in India that will, in turn, open your demat account with a national depository, namely the NSDL or the CDSL. It is convenient to open a combined demat and trading account.
Major Benefits of Opening a Demat Account
In an age where time is considered one of the most precious resources, demat accounts have made investing in stocks time-efficient and cost-savvy. Here are some of the prominent benefits of opening a demat account:
- No storage risks for securities: With your securities stored in an online demat account, you need not worry about any storage related threat whether it is the theft of share/ debenture certificates or any damage caused by natural elements. Furthermore, there is no requirement to sift through files to locate a particular security; all you have to do is access your demat account.
- Reduction in the cost of investing: Another key benefit of demat accounts is that your overall cost of participating in the securities market gets reduced. Unlike physical share certificates, their demat versions do not attract stamp duty. What is more is that you can check the full schedule of the charges associated with your demat and trading account, and identify inaccurate charges (if any).
- Convenience in monitoring your portfolio: In addition to storing your capital market securities in a dematerialised format, demat accounts also record each and every transaction to and from the account. Therefore, you can easily check the securities presently held by you as well as the purchase/ sell activity over a period of time.
- Seamless receipt of corporate benefits: With a demat account, you can easily receive a host of non-cash corporate benefits such as dividend and bonus shares. Furthermore, you can receive and track the interest on debentures and bonds held by you.
- Access to real-time market data and insights: Most modern-day demat and trading account platforms carry a wide array of information about the market, including analytical reports. Having such information handy can potentially help you make sound investment decisions.
- Ability to store various securities: A demat account can hold a variety of securities, ranging from shares to bonds, and debentures to mutual funds. Therefore, there is no need to open separate demat accounts for different asset classes.
- Easy route for IPO investments: With a demat account, you can seamlessly apply for the Initial Public Offerings of companies, and have the allotted shares credited in your name (should you get selected for share allotment).
To Sum it Up
With its multitude of benefits, a demat account is an excellent financial vault and a significant cog in the stock trading machinery. Not only does it enable you to enjoy a high degree of visibility and control over your investments, but it also enhances your access to real-time market information and reports.