Investing is the key to your financial independence and a comfortable lifestyle.
We all have a savings account, which gives a fixed and low rate of return but has little chance of exponential growth.
However, to get a comparatively good return from your investments, you should start investing in the stock market by opening a demat & trading account.
The wisdom of our ancestors carry forward through this popular Doha
काल करे सो आज कर, आज करे सो अब |
पल में परलय होएगी, बहुरि करेगा कब ||
Therefore the best time to start investing and working towards a better future is right now.
In this article, we will take you through the basics of demat and trading account.
What is a Demat Account?
Demat is short for ‘dematerialized’. A demat account acts as a safe, convenient, and an efficient way of storing your valuable investment certificates/securities in a digitized form. There are various depositories in India that manage Demat accounts.
What is a Trading Account?
Trading account is a platform to sell or purchase securities.
You can purchase securities through a trading account, the payment of which is made though the linked bank account. The securities are then stored in the digitized form in the Demat account.
Most brokers today offer demat and trading account as a bundle. This makes buying and selling very easy for the investor.
What is a Depository?
The depository is an institution, which holds your securities like shares, government bonds mutual funds etc. in dematerialized form on your behalf.
There are two depositories that are registered under SEBI –
- National Securities Depository Limited ( NSDL) – Established on 8th November 1996
- Central Depository Services Limited ( CDSL) – Established on February 1999
What is Dematerialisation?
Dematerialization is the process by which your physical securities are converted into a digitized form or an electronic form. Dematerialization was introduced in 1996.
FEATURES OF DEMAT AND TRADING ACCOUNT
- Enables you to buy or sell shares online quickly and easily.
- Avails loan against the securities held in the demat account.
- Freezing of your account for a specific period of time. This can prevent unexpected debit or credit to your demat account.
- Accounts are operated electronically, which means that you can access your portfolio from any electronic device connected to the Internet.
- Securities are in dematerialised form and not in paper form thus there is no risk of theft
- You are automatically updated about the benefits the companies offers to you as a shareholder.
Reasons you should Open your Demat Account
To start trading in equities
SEBI has made it mandatory for the investors to buy and sell stocks in digitized form.
Therefore, if you are planning to invest in the stock market, you will need to open a demat and trading account.
To invest in a wide of securities
If you have a demat and trading account, you can invest in a wide range of securities like equities, gold-related financial instruments, government bonds, private bonds and so on.
You should know that having a demat account is not required for making investments in mutual funds. However, if you have an online demat account, you can very easily access the whole mutual fund’s marketplace from one platform.
Track your portfolio performance
A demat and trading account incorporates all your investments into an easy-to-handle dashboard, from which you can track their performances.
This keeps you informed about your portfolio and helps further in taking decisions about buying, selling or portfolio balancing.
Doing in-depth analysis of your investments
You can very easily access the live market data. You can also make an in-depth analysis of your investments. It provides you with investment advice with regards to when to buy, hold or sell your securities.
Updates about market news
After making the investments, investors tend to lose track of important events with regards to that company or companies, which can influence the investors.
Demat and trading account curates this crucial information in a way that will be useful to you. Thus you can very easily track the announcements and other news from companies you are invested in.
It gives you information about the company’s performance; it’s projected revenue and profit. It, therefore, helps you to spot the exact investment opportunity.
Set alerts to automatically buy or sell stocks
In this fast-paced life it will not be possible for you to track all the stock movements. The demat and trading account makes it possible for you to set alerts and instructions to automatically buy or sell stocks at specified prices.
Cutting down the paperwork
Since the dematerialization of the securities has become mandatory, the securities are converted in the digitized form. You will never have to deal with the physical documents of the securities and related paperwork.
When you have to deal with the securities in the physical form, you have to incur various charges like stamp duty, handling and safety charges. All these charges are very hard to be predetermined.
When you open a demat account, you are free all these charges. Additionally, you are informed about all the charges in advance. You do not need to incur any additional or hidden charges.
Less risk involved
Keeping the securities in the physical form involves risks like bad delivery, fake securities, incomplete paperwork, or destruction of the paper or ink.
In the demat account, all the securities are in a digitized form, hence there above risk is removed.
Make transactions instantaneously
In the demat account, delivery is completed within a few days. Thus all your transactions become seamless and inexpensive.
If you are looking beyond savings and bank deposits, you must open a demat and trading account immediately.
It surely is a way for you to start creating a fortune for yourself and for your financial independence.