There are a few basic requirements to begin investing in the stock market. One of them is a Demat account. The account allows investors to hold shares and other securities electronically. Nowadays it is very easy to create a Demat Account Online with a very simple digital process.
Share certificates are not required with a Demat account. Instead, investments are held electronically and accessed via an online platform which makes it easier to check holdings and follow investment activity from one place.
What Is a Demat Account?
Demat account is to keep securities in a digital form. The word “Demat” is derived from the word “dematerialized” which means the conversion of physical certificates into electronic records. When an investor buys shares, they get credited to the Demat account. When shares are sold they are debited to the account.
The account is a digital ownership record. It lets investors watch the securities they hold instead of keeping paper records.
Significance of Demat Account
To hold shares of listed companies in electronic form you need a Demat account. It is also used to store several other types of securities. Multiple investments can be held in one account and accessed through one platform.
Some of the common securities that can be held in a Demat account are shares, bonds, debentures, exchange-traded funds (ETFs), government securities and mutual fund units in an electronic form.
How does a Demat Account Function?
How does a Demat account work? It is very simple. Once an investor purchases shares, the securities are deposited in the account after the transaction is completed. When those shares are sold, they disappear from the account.
All records are kept electronically. They can login to the account and see their holdings, statements and transaction details as and when they require.
Steps to open a Demat account online
The online process to Open Demat Account is done through a registered bank or stockbroker. Most providers have a full digital account opening process in place.
First, basic details are needed, such as a mobile number and an email address. Applicant submits PAN details and completes KYC process post verification Application is electronically signed and required documents are uploaded online. After the verification process is complete, the account is activated.
Required documents
Generally, investors need a few basic documents to open a demat account. These documents help confirm your identity, address and banking information.
The documents required are generally PAN card, Aadhaar card or other accepted proof of identity, proof of address, bank account details, recent photo and signature. The exact requirements may differ depending on the service provider.
Advantages of Online Demat Account
Online Demat account gives the user easy and digital access to the investment records. A mobile app or website allows investors to check their holdings, account statements and transaction history.
The account also helps you to keep your investments in one place. This allows investors to track various securities without having to handle physical certificates or paper documents.
Demat Account & Trading Account
Demat account and Trading account serve different purposes. A Demat account is for holding securities and a trading account is for buying and selling securities in the market.
Many investors use the two accounts together. You buy the securities and hold them in the Demat account and place your orders in the trading account.
Things to Consider Before Opening Your Account
It is helpful to know the services provided by the provider before opening a Demat account. Providers will vary in their rates and account features.
Investors can look for account opening charges, annual maintenance charges, online account access, customer support options and mobile application features. By checking these details, you will be able to find out what services are linked to the account.
Depositories in India
Demat accounts are linked to depositories which maintain electronic records of securities. There are two depositories in India . They are National Securities Depository Limited ( NSDL) and Central Depository Services Limited ( CDSL) .
These depositories do not open accounts directly for investors. Instead they use depository services from registered Depository Participants such as banks and stockbrokers.
Conclusion
Demat account is an important part of investing in the securities market. Investors can hold shares and other securities in electronic form and maintain electronic records of their ownership.
Opening an online Demat Account has become easy and accessible to open an account online. Investors who want to enter the market can open a Demat Account with a registered service provider and can manage their investments through a digital platform.
