How to use a Demat Account?

How to use a Demat Account?

A Demat account also called a “Dematerialized account”, where financial securities like bonds, shares, government securities and others are stored in electronic format to facilitate easy and safe trade for all the users.

The function of the Demat account is similar to another bank account. The only major difference between a Demat and a bank account is Demat account holds financial instruments, whereas banks account hold physical cash.

Demat account is the best way to use it for trading, investing, holding and other procedures of online trading in the stock market.

It helps all the investors to buy and sell shares, stocks, mutual funds, government securities without any paperwork required.

In earlier days, there were major changes of getting shares stocks and shares getting misplaced due to its physical existence.

Nowadays, there is no such physical existence of financial assets because of the Demat account. Instead, a Demat account protects all the financial securities and stored in an electronic format.

To trade in the share market, it is compulsory to have a Demat account without which an investor can’t perform the trade in the market.

There are several uses of the Demat account, such as:

  • Online Access
  • As physical existence is over and Demat accounts are made completely online, several investors have the opportunity to access their own Demat account at any time from any part of the world.

  • Holds Various Investments
  • Demat account can hold various holdings such as equity shares, mutual funds, and exchange funds under one Demat account.

  • Saves Lot of Time
  • Nowadays, everything is becoming digital, including banks; several online platforms make the work easier for investors and saves time in trading. Anyone can sell shares or transfer funds within seconds.

  • No Additional Costs
  • There is no additional cost of stamp duty, handling charges involved when an investor is trading in Demat Account. Therefore, it makes it easier for investors to performing trading without any trouble.

  • Delivers Instant Corporate Gains
  • The importance of the Demat account is very much when it comes to trading. Whether it is interest, dividends, or refunds, the Demat account holder instantly gets their corporate gains without delay.

    From stock split to bonuses, everything is updated instantly and automatically in the Demat account.

A Demat account only works when an investor has two other major accounts: bank and trading account. Otherwise, the Demat account's role is limited only to hold stocks, shares, funds, equities.

An investor must need a trading account to buy and sell stocks. Similarly, they also need a bank account to connect to trading and a Demat account that helps them to transfer money to a trading account.

When investors buy or sell a single share, first, they have to log in to their trading account. When the "buy" or "sell" account is put in the trading account for a single stock, the Depository Participant (DP) of an investor forwards this message to the stock exchange with other details immediately.

If an investor requests to "buy", then the stock exchange looks for a seller who wants to sell the same stock at the same quantity.

Thus the order is sent to clearance houses to debit the particular number of shares from the seller's Demat account and instantly gets credited into the buyer's Demat account.

Using a Demat account is a simple and straightforward process. Any investor can open a Demat account with any sub-broker or with an investment broker.

An investor must need a stable internet connection and a transaction password provided after the opening to get direct access to a Demat account.

The first thing in opening a Demat account is to select a Depository Participant (DP) who will perform as an agent to the depository.

An investor has to fill the form of opening an account and provide necessary details like a PAN card, AADHAR card, identity proof, and a passport size photograph.

After providing all the documents, an investor has to accept all the given terms and conditions and the charges.

Once it agrees to the terms and conditions, and in-person verification is started.

After the application is successfully processed, an investor will get its post verification, account number, and client ID which can be used to access their Demat account.

An investor can use the Demat account to buy and sell shares, derivatives, stocks, or they can use it as a storehouse to make a stock portfolio.

In addition to the Demat account, an investor will also require a trading account and a verified stockbroker to execute their purchase or sale of shares.

A trading account is an investment account that holds holdings like securities and cash just like any other brokerage account.

It gives you the detailed history of buying and selling shares in a single and specific account. However, it takes T+2 days for debit and credit of shares to be seen in the Demat account after the confirmation from the exchange and post-execution of the trade.

After getting confirmation, a broker's primary duty is to transfer all investors' shares into a Demat Account once the amount is paid before the pay-in date.

  • What is a Demat Account?
  • A Demat account also called a “Dematerialized account”, where financial securities like bonds, shares, government securities and others are stored in electronic format to facilitate easy and safe trade for all the users.

  • What is the use of Demat account?
  • There are 5 major uses of Demat accounts such as:

    1) It gives online access

    2) Holds various investments

    3) Delivers corporate gains instantly

    4) Saves a lot of time

    5) No additional costs

  • Is there any additional costs involved in Demat account while trading?
  • There is no additional cost of stamp duty, handling charges involved when an investor is trading in Demat Account. Therefore, it makes it easier for investors to performing trading without any trouble.