A Demat Account is essential if you wish to start trading activities. It holds all your investments in an electronic format. Examples include your bonds, government securities, ETFs, Mutual Funds, etc. Besides convenience, it also reaps various other benefits. The following are the most notable ones you should know about before you learn how to open a Demat Account online:
- Helps dodge risks
A Demat Account is a secure way of holding your securities electronically. It removes the risk of loss, theft, or damage to physical share certificates. Moreover, in case of any corporate actions like bonus issues, stock splits, or rights issues, the securities are automatically credited to the account. This helps you dodge errors and discrepancies.
- Discards stamp duty charges
Physical share certificates attract stamp duty charges, which can significantly increase the overall costs for investors. However, Demat Accounts eliminate the need for physical share certificates, thereby discarding the stamp duty charges.
- Quick transfers
Transferring securities from one account to another is hassle-free with a Demat Account. You can transfer securities bought through your Trading Account within minutes. This helps you save time and effort and make quick trades.
- Fewer transaction costs
The account significantly reduces the transaction costs associated with buying and selling securities. You need not maintain physical share certificates, which eliminates the cost of stamp duty, handling charges, and courier fees. Moreover, since the securities are held electronically, the brokerage fees are also lower.
- Eliminates the threat of forgery
Physical share certificates can be forged, lost, or stolen, leading to significant losses. However, a Demat Account eliminates the threat of forgery, non-delivery, and theft. This is because the securities are held electronically.
How to open a Demat Account online?
Considering the vast availability of online providers, it has become easy to open a Demat Account online. You need to follow these steps:
Step 1: Select a reliable Depository Participant and visit their website
Step 2: Click on ‘Sign Up’ and fill out the account opening form
Step 3: Upload the relevant documents asked by the DP.
Step 4: Sign a standardised agreement with the chosen DP
Step 5: Wait till your documents are verified
Step 6: Get your account number and ID via email
Things to remember when opening the account
- A DP is a registered intermediary that holds securities on behalf of an investor in electronic form. It is crucial to choose a DP that has a good reputation and is trustworthy.
- There are various charges associated with opening a Demat account, such as account opening fees, annual maintenance fees, transaction fees, etc. Make sure to compare the costs of different DPs and choose the one that offers reasonable prices.
- Before opening a Demat Account, it is essential to understand the features of the account, such as trading limits, margin requirements, and settlement cycles.