A demat account allows the investors to hold their securities in an electronic form instead of the physical form. It makes the entire process of trading, investing, monitoring and holding shares/stocks more convenient and faster.
Let’s look at some other reasons why demat account is so important:
- Much Safer: Earlier when there were no demat accounts, the physical form of shares were very difficult to store and maintain. There was always a risk of it being misplaced, stolen or damaged. But with stocks being maintained in an electronic form in demat accounts, our investments are much safer. Additionally, there are extra layers of securities, regulations and statutory compliances that make demat accounts a much safer option.
- Indispensable for Trading: You cannot trade in the stock market if you don’t have a demat account. Since stock trading is done electronically, unless you have a demat account for buying and selling publically listed shares, you won’t be able to carry out any transactions. It is mandatory to settle trades in a demat form (electronically) on any stock exchange.
- Multiple Securities Under One Roof: It can be extremely confusing for investors to maintain separate accounts for various financial products like debt securities, equity, mutual funds and so on. A demat account takes this hassle away from the investors and allows them to preserve multiple securities in one single account. This makes it easier to keep a track of all the financial products under one roof.
- Flexible Workplace: Demat accounts come with multiple accessing options as they can be operated electronically. This means you can buy, sell or simply monitor your investments from anywhere. You don’t have to even sit in front of a computer necessarily and can access your record using a laptop, smartphone, tablet or other such smart devices. You can trade while being on the move and don’t have to stick to sitting in front of your computer at the office premises.
- Odd Lots: When there were physical certificates for shares, it was not possible to deal in odd lots or single security. It was only possible to deal in specified quantities back then. Ever since demat accounts got introduced in India, it has become possible for a shareholder to sell just one share too from his holding if he wishes to.
- Lower Costs: There were many additional costs like stamp duty and handling charges when there were physical certificates for shares. But with the advent of demat accounts, all such expenses have been completely eliminated. This had led to a reduction in the costs of trading in shares and a considerable amount of savings for the investors.
- Quick and Convenient: Dealing with physical securities would involve a visit to your broker every time you wanted to buy or sell shares. But since demat accounts operate electronically, you are no longer required to make frequent visits to your broker and it can all be done online within a fraction of seconds. Also, there are no chances of any manual errors that may happen in case you want to transfer your shares in someone else’s name as the processes are now electronically handled.
The importance of demat account cannot be emphasised enough when we talk about trading in the markets today. If you want to make your share trading experience easier and more convenient, you must definitely open a demat account. They are fuss-free, extremely lucrative and a must for financial planning.
If you don’t have a savings account and want to open an integrated three in one account, you can visit Kotak Securities and opt for their Trinity Account.