Banks are financial institutions that tend to store your money safely and securely. Accessing your money can be availed through dedicated banking applications or third-party financial transaction applications. But wait!! You might be wondering why we are discussing banking when you guys want to know the importance of a Demat account, right?
So, what’s a demat account and why it’s important? These are the frequently asked questions in stock market world, for which we will find quick answers.
A Demat account is a type of savings account for the stock market where traders can buy shares/stocks and store them in such an account. They can be accessed easily through the apps provided by the stockbrokers in the country. While storing your shares is one of its functions, its importance is of plenty.
To uncover them and learn more about them, we have illustrated them below. Check it out.
Demat Account and Its Importance
Here are some of the key features that make a demat account all the more important for an investor:
1.Safety and Security
Gone are the days, when shares and stocks had to be kept in a physical piece of paper. It’s been replaced with a dematerialized system where the risk of shares being stolen, damaged, or misplaced is eliminated.
Moreover, the extra layer of security, regulations, and other compliances makes it safer to operate and utilize. Everything is in an electronic format and backed up with the latest and greatest of what technology has to offer.
Before a Demat account was introduced, selling or buying stock and shares would require continuous visits to the broker. This created a lot of problems and mishaps in how the stock market functioned.
With a Demat account, traders and investors can sell/buy shares within a fraction of a second and the chances of error are close to minimal. It’s real-time trading with eminent results and efficient services.
Without a Demat account, trading in the stock market becomes impossible. Its where all the transactions are carried out electronically and not manually.
However, there is a slight exception to this. If you’re concentrated only on intraday trading and do not have shares to hold for the long term, then only a trading account would be required and nothing else.
4. Lower Costs
With the older system comprising of physical bonds, additional charges such as stamp charges, certificate costs, and much more were required. Demat account removes all such charges where the only charge incurred is the brokerage fee, annual account maintenance charge, and other taxes here and there.
When you compare the costs incurred pre and post-demat account intervention, lower costs and make it quite convenient.
5. Multiple Securities Storage
Investors like to have a diversified portfolio where they can track their investment under one roof and not have multiple accounts. Well, it was the problem when the stock market hadn’t gone entirely digital. There are plenty of bonds, certificates, etc. that made it difficult to track everything. The risk of damage was too high, which rendered them useless.
However, with a Demat account, things have changed, and storing plenty of securities under one roof is now possible. To store different securities, shares, mutual funds, etc. under one account has become quite purposeful and useful.
6. Odd Lot Dealing Made Simple
Before the Demat accounts intervention, physical bonds and certificates issued as shares were only handed out in even denominations. Thus, it was either buying not according to what you could buy, but to closest denominations for what you are willing to spend in buying the shares. Demat account eliminates this.
Traders and investors can trade in the stock market with how much money they are willing to spend. In turn, causing a considerable amount of savings and making investments that made sense rather than haste decisions which in turn grew exponentially.
All thanks to the electronic medium of these accounts, trading has now become quite simple and straightforward. This is where making investments, and carrying out trades from anywhere is made possible. Traders and investors no longer have to sit in front of a computer, but can trade through mobile phones, tablets, and more.
It’s not only the demat accounts that count but the stockbroker that you choose to open the account matters. They tend to offer different trading tools and insights to your trading venture, making it easier on your hand to have a fruitful investing orientation.
Demat accounts have become an integral part of the stock market. Its where traders and investors can keep store their investments.
Moreover, opening the best demat account in India has been streamlined by the country’s leading stockbrokers and can be done online for free. Choosing the correct stockbroker to open a demat account can provide considerable benefits in terms of margins gained per trade, advanced tools offered, and the overall investment procedures.