A demat account might appear to be new and a complicated process for a normal man. But it plays a significant role in dealing with different securities like shares, stocks, mutual funds, bonds and even gold. Today most of the shares settlement is performed only on demat accounts since the majority of the companies are trading through this account only. It is mainly used for trading shares particularly for those transactions that are performed on an electronic platform.
As per SEBI guidelines, without a demat account one can never invest in the stock market. Earlier opening a demat account was a complicated process which has become so simple with the advancement in technology. Though it can be opened with the help of stock brokers or financial institutions, it is recommended to open with a registered DP.
Opening a demat account
You need to fill up a form, which is basically an agreement with the depository that is registered. A copy of your PAN card coupled with your residence proof, two passport size photos and a cancelled cheque leaf have to be submitted. The cheque is for linking the demat account with that of your bank account. Apart from these, you need to submit either passport, voter ID or driving license as your identity proof, and a document for address proof like latest bank statement, ration card or telephone bills. Account opening and other charges vary with the depository participant.
Functioning
The functioning of demat account is just similar to a savings bank account. Instead of money this account deals with securities. This account is electronically held and hence avoids all risk of possessing securities physically in the form of papers. You are also facilitated to obtain data and all related records of your investments by viewing your regular statements. There are numerous firms performing this function, which also assist you in learning to trade in this widely fluctuating market. They also give a complete insight of the market irrespective of whether you trade in derivatives, equity or commodity. Well trained professionals who are aware of the fluctuating market trends guide you to wisely invest in the market and assist you in obtaining maximum profits.
Merits of online trading
The investor is allowed to freely trade in the market without any time constraint. One of the most important advantages of online trading is its ease and convenience both in trading and banking. An online demat account is very simple to operate and manage and is the best place for parking your securities. You can have any number of accounts, and there are no restrictions.
The transaction costs and paper costs are considerably reduced since stamp duty and other related charges are not required for transferring your securities. You can trade from anywhere in the world, and the transfer of securities can be done in no time just by giving an instruction. Risks connected with thefts, forgery, late transfers are all avoided. This account saves you from all such hurdles, and since all your investments are electronically held, you are assured of the safety of your long-term investments.
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