What is Demat Account and its Importance?
A Demat account does what a savings account does with the bank. It keeps your investments safe and is the primary requirement for stock market investment, offering the facility to hold financial securities electronically. Apart from Indian depositories like CDSL and NSDL, other intermediaries or DPs like Klevertrade provide these services.
Now what is Demat Account
A Demat account is where investors keep their financial securities and stocks electronically. The Indian stock markets now follow a T+2 days settlement cycle, which means all your delivery trades are credited into your Demat account two business days after you make a trade. With rampant technological growth, people are driven to open Demat accounts digitally because it enables easy trading and investment.
Importance of a Demat Account
Now that we know what is Demat account is, let us find out why it is a prerequisite in the trading world. Here’s why:
- Easy track of records: A Demat account is a convenient and secure way to keep securities, shares and assets. It eliminates the fear of damage to physical certificates, loss, forgery, and theft.
- Instant transfers: Whether transferring money from your bank account to a trading account or making purchase orders, all the transactions are instantly transferred into the investor’s account.
- Automatic crediting of shares: In situations like mergers, stock splits, or bonuses, the shares are automatically credited to the investor’s account. Even in the case of dividend-paying shares, the dividend is auto-credited into the investor’s bank account, making the trading experience convenient.
- Centralised Portfolio: A Demat account enables investors to create a centralised portfolio for all the investments accessible from any part of the world with just a click. It also allows users to get regular news updates on their devices.
- Reduced Brokerage: An electronic trading process has considerably reduced brokerage costs. Now, investors can open a Demat account with minimum brokerage cost and save on the extra bucks they had to pay to stockbrokers earlier. It further bars the investors from paying any stamp duty for purchasing stocks and other financial securities.
A Demat account gives investors the liberty to manoeuvre their portfolio as per their liking. It enables them to buy and sell shares keeping in mind the model they wish to follow. An online Demat account has brought a massive shift in traditional trading methods. Additionally, Demat accounts have made the trading process more transparent than ever, making them extremely important in your investment journey.