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Digitization has revolutionized the entire world in all its entirety. People no longer trade or hold physical shares. When it comes to investments, the systems have rapidly become digital and as a result paperless. Technology has been beneficial and helped us in investing in stocks electronically.
Ever since the dawn of the digitalization of Equity Marketing the Demat accounts have become essential and a household name. The Demat Account system was introduced in India in 1996. This eliminated tedious paperwork and the cumbersome need of holding physical share certificates.
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What is a Demat Account
A Demat account holds and maintains shares and securities in an electronic/digital format. A Demat account facilitates easy trading and stock holding. A Demat Account holds all the investments of a person in one place.
Demat or Dematerialized accounts are similar to bank accounts, with the difference that instead of money they hold
- Stocks
- Securities
- Bonds
- Debentures
- Mutual Funds
- ETFs
So, to trade in the Indian stock markets and to buy or sell securities, the first and essential step is to have a Demat account. Nowadays, most brokers provide an investor with an option to open a free Demat account online.
Who Can Open a Demat Account?
With the enormous growth of our economy many new investors are turning towards investing in the stock markets. Presently, after understanding the value-investing in the share markets, mutual funds, and more, an increasing number of people seem to be more inclined to invest big in these markets. The basic criterion to invest in share markets is to have a Demat Account. The basic eligibility criteria to open a Demat account includes –
1. Age Limit
- There is no minimum age requirement to invest in the stock markets.
- You don’t have to be 18 to get started, contrary to popular belief.
- Both Adults and Minors can choose to invest in the Stock Market
- After filing their paperwork, a minor’s account can be opened by the father/mother or the court-appointed parent.
- Until the minor reaches adulthood, the parents or parent(s) may be responsible for the account.
2. KYC
- The most important step in opening a Demat Account is to ensure the Validity and Authenticity of the Account Holder via a standard KYC (Know Your Customer) process. All the brokers nowadays offer an online KYC.
- This KYC is compulsorily Aadhaar-based. Thus submission of Aadhar Details is compulsory for opening a Demat Account.
3. PAN Information
- To get started with your Demat Account, you’ll need to submit PAN card details.
- PAN Card details are mandatory for all those who want to open a Demat Account.
Procedure to Open A Demat Account
Nowadays, it has been very convenient and easy as most brokers provide the facility to open a Demat Account online to their customers. To open a Demat Account, the following is the standard procedure.
1. Choose a Depositary Member or DP: Choose a DP that provides good service. The depository member is generally your broker. You can choose a service provider that provides online services, saving you time and money. You have the freedom to choose a DP of your own choice. It is possible to open Multiple Demat Accounts with multiple different DPs.
2. Account Opening Form: You need to fill up and submit the Demat account opening form along with the necessary details.
3. KYC Compliance: Adhere to all KYC (Know Your Customer) norms. Then submit all the necessary KYC details to the Depository Participant.
4. Personal Verification: The DP representative must perform a personal verification to double-check the information provided on the Demat account form.
5. Receive account number/unique ID: When verification is complete, DP will notify you of a unique account number or ID.
6. Prepare to access your Demat account. Your unique ID is your key to accessing your Demat account.
How to Open a Demat Account Online
- To open a Demat Account online you can sign up online from the website.
- You can also download Smartphone apps ( Android & iOS) and Sign Up on them.
- It is advisable to download the app since signing up will require the latest photograph of yourself, which can be easily taken from your phone camera.
- If your documents are ready, it will take you about a few minutes to Sign Up and upload them.
- Once you upload all the necessary documents and they are verified and after that, you will receive an OTP.
- Enter your data and you will receive an
- After verifying your OTP, you will receive a message from your DP asking you to contact us to complete the above process and open a Demat
- You are ready with your Online Demat Account.
Documents Required to Open a Demat Account
You must produce a set of documents for personal identification and address proofs, as well as your most recent photographs, for opening a dematerialized account. There are the following two types of Documents that are mandatory for opening a Demat Account –
Proof of Identification (POI)
This is a document that proves the authenticity of your identity such as –
- Voter’s ID
- PAN Card
- Passport
- Driver’s Licence
- Utility Bills
- Telephone Bills
Proof of Address (POA)
This is a document that shows where you live and the proof of your residential address such as –
- Ration Cards
- Passports
- Voter’s ID
- Driver’s Licence
- Bank Passbooks/Bank Statements
- Certified Copies of Electricity Bill
- Telephone Bills
Important Tips while opening a Demat Account
Before you open a Demat account with a depository participant, there are a few things to keep in mind. At the time of opening a Demat account, keep the following pointers in mind –
1. Fill in all the information correctly:
Before submitting your Demat account opening form, double-check the information and details you provide. In this manner, you can ensure that there are no errors or fields that are left blank. These types of mistakes can lead to your application being denied. You could also ask the services of a third party to verify your form before submitting it to confirm that all of your information is right.
2. Add a Nominee:
Perhaps most ignore the step of adding a nominee while opening a Demat account. If not done at the time of opening a Demat Account you might forget to add a nominee altogether. Having a nominee for your Demat account is essential as it makes the process of passing-on of shares much easier in the future.
3. Make sure you’re aware of all the fees associated with your Demat Account:
Always read carefully the statement of charges before submitting your Demat account Opening Form. You can also compare them to other depository participants to make sure you’re getting the best price possible. You won’t be taken off guard once you’ve started trading if you’re informed of the fees upfront.
4. Link your Demat Account to Trading Account
To purchase and sell stocks on the stock market, you’ll need a trading account. Without this linkage, a Demat account has no use other than to store your financial assets. As a result, linking both of these accounts while opening a Demat account is a good idea.
So, if you want to invest in equities and benefit from compounding by investing for the long term, go ahead and open your Demat account right now.
