A Demat account is often referred to as a Dematerialized account. The basic purpose of a Demat account is to store shares and securities electronically. It aids you in online trading, such as purchasing and selling stocks or converting actual stocks to electronic form. All stocks, mutual funds, bonds, government securities, and other investments are kept in a dematerialized account. It also allows investors to make intraday deals.
A Demat account stores stocks and securities in the same manner as a bank does. Its securities are stored electronically. A Demat account is required for an investor who desires to trade stocks on a delivery basis. A Demat account is not required if the investor only wishes to trade futures and options. However, because all trades are settled through a Demat account, having one becomes required. All financial securities must be stored and monitored in one location.
Furthermore, this account is far safer than a real share or financial security certificate. It is not at risk of being lost or misplaced. This account may be viewed from anywhere because it is online. A Demat account can be used to purchase odd lots of shares, which were previously not feasible with physical certificates. Furthermore, stockholders with Demat shares are entitled to the right issue, bonus issue, and dividends, if any.
Below mentioned benefits will help you to understand the need for a Demat account in today’s world. The four primary benefits listed below will help you understand why you need a Demat account:
- Previously, shares were traded using certificates or physical receipts, which required a lot of paperwork and slowed down trading activity. Nobody could conduct a transaction unless they presented their certifications. It is the owner of electronic securities. As a result, it is simple to transact.
- The danger of loss or forgery has long made trading real securities problematic. All of these risks are eliminated by Demat accounts in India, providing you with peace of mind.
- Typically, when dealing with physical share certificates, investors must pay for various unexpected expenses such as handling fees, stamp duty, and so on. By using a Demat account, you can avoid the costs of holding shares in the form of physical share certificates. You can also find out the exact amount of the transaction ahead of time.
- Physical certificate delivery used to take days, if not weeks, due to the administrative system that had to be followed. You can avoid the waiting period by using a Demat account, which allows for instant transactions.
Prior to Demat, the securities investing procedure was extremely time-consuming and paper-intensive. Managing all of the paper securities before 1996 was expensive and time-consuming. There were other risks involved with it, such as theft and bodily harm. Now there are a number of share market courses to help people. Dematerialization has made trade more accessible and less time-consuming in general. Above all, it makes purchasing and selling stocks safer and more secure. However, in order to choose the correct service provider, you must first define your goals and objectives.