To engage in trading activities, having a Demat Account is crucial as it securely holds all your investments in an electronic format. It entails a host of financial instruments, including bonds, government securities, ETFs, Mutual Funds, and more.
Apart from offering convenience, a Demat Account provides numerous additional advantages, ensuring a seamless and rewarding investment experience. The following are some of the notable ones you should know about before you learn how to open a Demat Account online.
Avoid risks
A Demat Account is a safe and secure way of holding your securities electronically. It eliminates 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.
Dodge stamp duty charges
Physical share certificates attract stamp duty charges, which can significantly increase the overall costs for investors. However, a Demat Account opening eliminates 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 the account. After assessing the Share Market, you can quickly transfer securities bought through your Trading Account. 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 do not need to maintain physical share certificates, which eliminates the cost of stamp duty, handling charges, and courier fees.
No 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.
Steps to open a Demat Account online
Considering the vast availability of online providers, it has become easy to open a Demat Account online. You simply need to follow these steps:
- Select a reliable Depository Participant (DP) and visit their website
- Click on ‘Sign Up’ and fill out the account opening form
- Upload the relevant documents asked by the DP.
- Sign a standardised agreement with the chosen DP
- Wait till your documents are verified
- 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 account opening, understand the features of the account, such as trading limits, margin requirements, and settlement cycles.