Why Demat Account Is Necessary And How to Use It? | LKP Securities
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Equity | October 26
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Why Demat Account Is Necessary And How to Use It?

A dematerialized account or a Demat Account is your one-stop solution to hold all your securities securely. There was a time when every share or security document was available in the physical form. However, with the advent of Demat accounts, these physical shares are now converted into electronic records. Having a Demat account will facilitate the safekeeping of securities and ease trading.

 

Nowadays, people open demat account online without any delay. This has over the years made trading on shares easy, fast, transparent, and far more reliable. A Demat account stores all types of investments, funds, or securities that you hold as a portfolio. Gone are those days when people had second thoughts before investing anywhere.

 

Just a few decades back the share trading system here in India was clumsy. Moving papers from one place to the other, chances of losing papers, etc., made share trading less transparent. People started believing in share trading when the electronic format was introduced.

 

Why having a Demat Account is necessary?

Demat accounts facilitate a faster and more convenient way to deal with securities than any other means of trading. Let’s dive deeper and understand why having a Demat account becomes necessary -

 

?     Way safer than physical form - With a physical format of record-keeping, you always stand a chance of losing out on documents. People invest in so many shares or stocks and investments over the years.

And then we move from one apartment to the other and have our house repainted. One fine day you try to find all the documents and you notice some share certificates are missing. With an online demat account, you do not run the risks of losing documents relating to your investments.

There is no chance of you misplacing, someone stealing from you or you damaging electronic records of your investments. Not just that, your Demat account is always guarded heavily with extra layers of security, statutory regulations, and compliances.

 

?     There is no other way, anyway - Demat accounts these days are a prerequisite before moving forward. All stock exchanges have mandatorily postulated the use of Demat accounts before dealing in stocks and shares. Every time you wish to deal with publicly listed shares you will have to go through the electronic processes only.

 

?     Creating a portfolio - Imagine this, that you may invest in Mutual Funds, some on Blue Chip companies, and some with others. Would it not be nice to have all the necessary documents and papers in one single place? People are more inclined towards digitalization nowadays because of this reason alone. With a Demat account, you can centralize all your investment files and store them in one place, under one roof.

 

?     Significant flexibility - You will be able to access your portfolio at any time of the day without any delay or discrepancies. More importantly, you may choose to observe how everything is going around your corner or decide to trade some of your stocks.

Moreover, you can access your portfolio from every electronic device with an active internet. Use your smartphone, tablet, or mobile phone devices to access or trade on securities at your leisure or while you are on vacation.

 

?     My Shares, my rules - Back in those days, such was not the norm. You could sell only a prescribed amount of shares instead of singling out how much you wish to sell. If you had 45 shares of a particular company while selling you had to share the entire lot or a bunch of it. Demat accounts have successfully cut ties with such a concept. Now you can easily single out on a single share and choose to sell it.

 

?     Cut down costs - One of the reasons everyone accepted the electronification of the trading processes. Why should I give away portions of my own money to middlemen? That argument alone formed the genesis of digitalization and the introduction of Demat accounts. Now, one can trade on shares, stocks, investments, etc., without having to pay for services like stamp duty and handling costs.

 

?     Faster, convenient, and translucent - With free demat account opening across the country, trading in shares became way faster than what it used to be. You can sell and buy shares within seconds without wasting any time whatsoever.

Moreover, the entire process of share trading became much more transparent with this electronic format.

 

How to Use your Demat Account?

 

Opening a Demat account is like signing up before you enter any social media account -

 

?     Registration - You need to get yourself registered first and create an account. For that, you need an active internet connection. As soon as you open your account you will receive a transaction password, that you need to protect.

?     Selecting your depository - Well, you have two options to choose from, - the National Securities Depositories Limited (NSDL) and the Central Depository Services Limited (CDSL). These depositories hold pools of shares which are pre-verified to be traded in the electronic form. That means trading in shares approved by NSDL and CDSL is safe and secure.

?     Be prepared for an in-person verification - You need to submit your identity proof, PAN card, passport-sized photograph of yourself, and address proof. Thereafter, an official will visit you in person to verify every last detail.

?     DEMAT account number - Once your verification is over you will receive your ID number or Demat Account number. You need to use your transaction password with this ID to access your Demat portfolio.

?     Trading account - You need to open a trading account to smoothly buy and sell your securities. Keep transaction history intact and refer back to figure out your investment patterns, profits, and losses.

 

Have your shares transferred to your Demat account after clearing broker fees. It will take roughly about 3 days to have your shares transferred. Before agreeing to sign a POA or Power of Attorney in favor of your broker make sure you go through every clause. In case, your Demat agreement talks about non-issuance of ‘debit instruction slips’ to you, clarify the term, and understand its implications.

 

So far as demat account opening charges are concerned it is almost always zero or free! However, some stockbrokers while opening Demat accounts on behalf of their clients do charge some money. While others have a set range beyond which they charge Demat account opening fees. 

 

LKP is designed to serve all your financial investment requirements. Their internet-based Demat services are based on well-founded research and market analysis. LKP has successfully handled major portfolios with utmost professionalism over the years. Integrity and honesty are some of the crucial factors for why people choose LKP securities.

 

Moreover, they provide the following services - Debt and money market broking, Category 1 merchant banking, Margin funding & loans against shares, Mergers & Acquisitions, Mutual Fund Distributors (AMFI registered), IPO distribution, and Life insurance distribution.

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Attention Investors

  • Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.
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