A Dematerialised account, usually called in short form as Demat account is an electronic kind of account that allows you to hold shares, bonds, mutual funds, and other securities in an electronic form, rather than as paper certificates. Put simply, imagine a Demat account as an investment bank account: just as you store money in a savings account, your Demat account stores your stocks and securities. This account is necessary if you wish to invest in the Indian stock market, as all trades nowadays occur in electronic form.
Demat Account: Why Do You Need One?
- Safety: Safeguards your investments against theft, damage, or loss issues inherent with paper certificates.
- Convenience: Simple to buy, sell, or transfer securities online without any paperwork.
- Access: Allows you to store a diversified portfolio (shares, bonds, ETFs, mutual funds) under one roof.
- Quicker transactions: Settlements and transfers are made speedily, with credit of dividends or bonus shares by way of auto credit.
Demat Account: How to Open
Opening a Demat account online in India is an easy process. Follow these steps:
- Step 1: Select a Depository Participant (DP): Depositories such as NSDL (National Securities Depository Limited) or CDSL (Central Depository Services Limited) hold all Demat accounts. But you open your account with a depository participant (DP) these are typically banks, stockbrokers, or financial companies.
- Step 2: Fill the Application Form: Visit the website or branch office of your preferred DP and complete the Demat account opening form. Most DPs now provide 100% online onboarding.
- Step 3: Provide Required Documents: You’ll need:
- PAN card (mandatory)
- Aadhaar card or another valid address proof
- Recent passport-sized photograph
- Canceled cheque or bank statement (to link your bank account)
- Step 4: Complete KYC and In-Person Verification (IPV): The DP will complete your Know Your Customer (KYC) process. This could be an online video verification or in-person visit.
- Step 5: Get Your Demat Account Number: After validation, you are given a Demat account number (beneficial owner ID) and login information. You can now view your account online through a website or mobile application.
Tip: A few brokers provide 2-in-1 or 3-in-1 accounts that have Demat, trading, and banking facilities to make investment easy.
Demat Account: How to Use for Trading and Investment
- There is no minimum balance required in a Demat account.
- Fees can be charged: Certain DPs do charge account opening, yearly maintenance, or transaction fees (these are different, so do compare before you select).
- SEBI regulates all transactions for security and transparency
- Once the account is opened, the users can explore the several stocks on the exchanges and the mutual funds, trade and invest accordingly. The interface of the demat broker enables one to add funds for buying stocks and accordingly trade or invest for short or long term. Similarly, mutual funds can be bought and sold, F&O and commodities can be traded as well. Users are advised to understand the website better and get used to it before regular usage for trading and investment.
Nutshell
One needs a Demat account to invest in the Indian stock market these days. It is a simple and primarily online procedure to open it, which makes investing in the stock market easy, safe, and paperless for everyone.
