Use of a Demat Account
A demat account is a common term heard among investors in the capital market; it is what facilitates easy trading in stocks. As investments in the capital markets begin, the various demat account uses are revealed to the account holder. A demat account acts as a repository that holds and manages your stocks. Once you open a demat account, you can use it to hold your shares and securities in electronic format. Having a demat account online enhances convenience while investing in the stock market.
Before we explore the demat account uses online, it is important to know what a demat account is.
What is a Demat Account?
A demat account (abbreviation of dematerialised account) allows the user to hold the shares and securities in an electronic format. A demat account in India is just like a bank account. Where a bank account holds your money, when you open a demat account, you can use it to hold the digital copies of your shares and stocks.
The demat account uses are beyond just holding just shares and stocks. It also allows the investor to hold other financial products such as bonds, mutual funds, government securities as well as exchange-traded funds. However, remember that you need a trading account, along with a demat account to buy and sell the shares and other instruments.
Having a demat account online allows the holder to do all of this at the click of a button reducing the paperwork.
What are the Demat Account Uses?
When stocks and shares are stored in the physical form, there are chances of them getting damaged or misplaced. However, when you open a demat account, you ensure the safety of your shares and other financial assets, as these are stored in an electronic format in a demat account.
Additionally, to trade in the share market, a demat account online is a mandatory prerequisite. Without having a demat account, one cannot carry out trade in the capital market. Here are a few other demat account uses that account holders can benefit from: -
- It is Convenient: Having a demat account online makes it easy to access your account anytime and from anywhere in the world. Moreover, earlier, the conventional transactions in the stock market required a minimum amount of shares purchase. However, having a demat account online eliminates this barrier and allows investors to buy or sell any number of shares.
- Promises Better Security: One of the most important demat account uses is that it comes with better security. A demat account in India is maintained by two reliable depositories that are National Securities Depository Limited and Central Depository Services Limited. The transactions here are electronically recorded, and therefore the risks associated with physical accounts such as theft, damages, fake deliveries, etc., are eliminated when you open a demat account online.
- Holds Varied Financial Products: You can open a demat account even if you don’t have any shares. The demat account uses are varied, and it can also be used to hold other investments such as mutual funds, exchange-traded funds, bonds, etc., all under a single account.
Enables Quick Monitoring:With a demat account online, one can easily monitor their holdings from the comfort of their homes. It is Time-saving:Amongst the demat account uses online, an important one is the ability to trade directly from anywhere without having to make frequent bank visits. This helps save a lot of time. The credited and debited amounts reflect directly on your demat account online. You even cut down on the time of having to collect the statements from the bank as the statements are shared directly with the investor. Involves Minimal Costs:Another benefit of a demat account uses online is that the account holder does not have to pay additional costs such as stamp duty, handling fees, etc., which come with physical trading. Quicker Corporate Gains:Everything from interest and dividends to stock split and bonus issues reaches the account holder without any delay.
There are several benefits of having a demat account in India, and it is easy to open one from the convenience of your home. As it enables quicker and safer trading in the capital market, it is recommended that one gets a demat account sooner rather than later.
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Once you open a demat account, you will need to link it to two other accounts to operate it: a trading account and a bank account. The demat account online is just to hold the financial assets such as shares and securities. You will have to have a trading account to actually buy and sell shares. All the amounts credited and debited during transactions are sourced from the bank account, necessitating the need to link your trading account with your bank account.
Yes, it is possible to link the trading account with a demat account in India. A benefit of this is that it eliminates the need to provide account details before every transaction.
Amongst the most important benefits of a demat account is that it enables safer and transparent transactions. Additionally, it makes investing in the capital market extremely convenient as once you open a demat account, it can be accessed anytime and from anywhere.