Do you have a bank account? Of course, you do! You are mostly wondering – “who doesn’t” right?” Just like the part a bank account would play to people dealing with finances (which is everyone today), a Demat account would play for the movers of the stock market. If you have one, you know the part that it plays, and if you don’t – don’t be puzzled, you can invest with or without it. Just the way you can deal money in cash – but isn’t it just convenient? Here we can talk about a Demat account and how you can make use of it.
Firstly, let’s start from scratch and understand what a Demat account really is.
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What is the Meaning of a Demat Account?
A Demat (dematerialized) account is similar to a bank account. It is just that, with a bank account, you will hold money, and the entries that are made are done in your statement.
In the case of a Demat account, instead of the money, you will be holding securities in them in an electronic form – which instead of money, you can debit and credit securities.
It is an electronic account that works to hold all of your securities. Therefore, when you buy a security, you can link it to the Demat account, and you can check on it whenever you want. Just like how you would access your bank account online with the log-in ID and the password, you can log in and check your Demat account online with its unique number.
There are no limits to the number of securities you can hold in this account since it will all be in electronic form. When you sell that particular security, it will be removed from your Demat account. Just the way when you add money to your bank account, the money is credited to you, and when you send someone money or pay bills and more, the money is debited in your account.
Why Do We Need Demat Accounts?
We need a Demat account because of different reasons, and those reasons include simplicity, convenience, and cost-effectiveness. Holding your securities in the dematerialized form will eliminate the issues that revolve around theft, mutilation, and certificate losses.
Adding to that, the process of a transaction through a Demat account is cheaper and easy because it eliminates the cumbersome processes that include stamp papers.
How to Open a Demat Account for Yourself?
Have you been thinking, “I need to do one thing now – Open Demat account.” Well, that is the first thing anyone who starts investing wants to master. But, guess what, it is the simplest procedure you can find. Let’s look at it.
Step 1: You will have to select a depository participant and submit the account opening form in order to open it.
Step 2: Complete the KYC (Know your customer) procedure completely.
Step 3: Finish the process of verification and then sign the agreement copies with the depository participant.
Step 4: You will then get approval.
Step 5: After the approval, you can get your unique beneficial owner identification number.
This is typically the standard process for opening a Demat account; easy, isn’t it?
Basics of Using your Demat Account
Well, using your Demat account can be anything similar to using your bank account – but just in electronic form. Yet, here are some ground rules you would need to know in order to go further with using your Demat account:
1). Your DP: Now, your DP does not mean your display picture; it means the depository participant that you choose. This DP will serve as a middleman or a representative for a central depository, and it gives the same service to investors and traders as the central depository. If you want to open a Demat account, you will have to be registered with NSDL or CDSL, who are registered with SEBI right now.
2). Your 16-Digit Client ID: The unique 16-digit client ID is assigned to every Demat account that serves as the investor’s ID proof. The very first eight digits of this number will reflect the DP, and the last eight digits of this number will serve you as a unique identifier, and it will be made easier to sell or buy shares and securities.
3). Dematerialization: This is the process that will allow share certificates to be converted from the physical form to the electronic form. The shares that are purchased after that will be easier to handle and could be accessed from anywhere on the globe. You could also control and track your holdings on the go, and all of those credits will go to dematerialization.
Buying Shares with a Demat Account
Every investor or trader will be allowed to allocate and link the Demat accounts with the trading accounts that will let them see all of the Demat holdings. Share allocation procedures are simple, and it will take more than a few minutes.
All of your shares can be allocated once, and then for every new purchase, the shares could be allocated through the allocated share options. Shares will have to be allocated as often as the purchase is made. The time duration and the frequency of the allocations will also depend on the share purchase.
A few years ago, if you had to keep a tab on your investments – it was quite tedious. The Demat account has made that process simple and easy. You can find all of the details of the investments you need just in one place.
Everything that you have to do for this is registered and create a Demat account. As simple as that. After that – you will automatically be learning about it as you begin to use it.
Using the Demat account is not at all hard, and it can be made easier when you first begin by opening it. Once you have opened it – you will find prompts and guides everywhere that you can make use of. Having a Demat account is taking your investments to the next step, making you an even more organized investor.
Originally posted 2022-08-13 23:27:23.