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What Is a Demat Account And How To Open It?

by Williumson
Demat Account

A Demat account is necessary for holding securities like mutual funds, government securities, bonds, and shares in electronic format. A demat account meaning is a dematerialised account that holds the securities you hold in digital or electronic form. Many brokers offer a free trading account with a demat account these days. It enables you to start investing and trading in the stock market without any hassles. Your securities are safe in a demat account and it allows you to trade and manage them efficiently. These days, a demat account can be opened online easily. The following steps will guide you to open a demat account in India:

Choose a DP 

Firstly, you need to choose a depository participant with whom you can open a demat account. You can also open a demat account with a bank, financial firm, or broker. However, these entities must be registered with the depositories like NSDL or CDSL. 

Ideally, you should go through the account opening charges, AMC (Account Maintenance Charges), brokerage, and other fees applicable with different DPs before choosing one. 

Fill an application form 

After choosing a DP, you can visit their website and fill out an application or account opening form. After filling all the details, you can submit this form online and upload copies of documents such as PAN Card, voter ID, Aadhaar Card, Passport, etc. These documents are to verify your identity and address. You also need to upload a couple of passport-size photographs on the portal. 

Complete the verification round

After submitting the documents, the DP will call you for a personal verification round. You have to carry all the original documents while visiting their office. These days, many DPs also allow you to complete your verification online. They have the provision for uploading the digital signature and photographs of a cancelled cheque to complete all the necessary formalities. Do read all the offer documents carefully before uploading your digital signature. 

Finally, a demat account will be opened and you will be provided with a user ID and password to login to your demat account. 

Benefits of a demat account

A demat account provides you with the following benefits:

Creating a diverse investment portfolio 

It is possible to invest in stocks, mutual funds, bonds, government securities, and other types of securities to a demat account. Therefore, if you want to create a diverse investment portfolio, you must open a demat account

Safety of investments 

You don’t have to worry about the safety of your investments if you own a demat account. It is because your securities are held securely in a demat account. You don’t have to spend on maintenance or storage of securities that are involved with the physical securities. 

Seamless investment 

Investing through a demat account is much easier and time-efficient. You can invest in stocks in real time if you have deposited enough funds in your demat account. The demat account is linked to a trading account that allows you to buy and sell securities within seconds. 

Easy transfer of shares in demat account 

If you have multiple demat accounts, you can transfer your shares from one account to another seamlessly. You have to fill a DIS (Delivery Instruction Slip) to transfer the shares smoothly. This facility proves to be handy when you open a demat account and want to add all the shares from your old account in the new account. 

Monitoring stocks 

Apart from monitoring the value of stocks in real-time, a demat account also provides you information about the company in which you are investing. It gives you an idea whether you must invest in its stocks or not. You also get information about the latest IPOs that are launched in the stock market via a demat account. You can book the required slots of IPO that you are interested in through your demat account. 

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