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Why You Should Have a Demat Account?

In an age of digital technology, anyone who wants to buy ordinary stocks and securities should have a Demat account. This means that you can keep your investments electronically without physical share certificates. Through this change, the trading process has become more efficient as well as safe.

In June 2024 alone, there were 42 lakh new accounts making a total of 16.2 crore Demat accounts in India today according to statistics released by the Indian Stock Exchange. The increase indicates a growing preference among investors for convenience and efficiency offered by Demat accounts which makes them essential for modern financial management.

This article will discuss why having a Demat account can make your investment journey smoother and more efficient.

What is a Demat Account?

A digital account called a Dematerialised account or simply known as “Demat”, is used to hold electronic securities such as shares, bonds, mutual funds etc. It eliminates the need for physical forms of certificates thereby enhancing efficiency and security levels in transactions.

For instance, one may purchase, sell or transfer these securities with ease using his/her Demat Account without having to deal with paperwork involved in processing of documents.

With this model comes an easier investment approach, reduced loss chance through thieves or misplacement among other benefits like real-time portfolio viewing and transaction realisation by investors.

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Why Having a Demat Account Important

Anyone who wants to trade or invest in securities within India must ensure that they have a Demat account. Here are some reasons why it is important to have a Demat account:

You Cannot Trade Equities Without a Demat Account

Trading equities under SEBI regulations cannot be done without holding a Demat account which applies across all sectors irrespective of whether primary market IPO allotments or secondary market trading takes place on BSE/NSE/OTC exchanges through depository system only. Therefore, if you are considering going into equities, index ETFs or gold ETFs then a Demat account is compulsory. Even if you want to trade only intraday, SEBI rules insist that you must have your Demat account in place.

It Does Away With so Many Traditional Hassles

As it was earlier mentioned, shares used to be sent to the company/registrar for transfer into your name before the establishment of the Demat system. Bad delivery, signature mismatch and loss of certificates in transit are some of the issues that may arise. All these problems are done away with by Demat where transfer forms will no longer worry you as well as stamp duty costs. The reason is because it is cheaper than physical holdings and also more convenient and faster. In addition, this eliminates the possibility of fraud alongside duplicate certificates.

You can Consolidate all Assets in One place

Although Demat is compulsory for shares as well as listed ETFs, there are others where it isn’t. This includes items such as open-ended MFs, close-ended MFs, private bonds, gold ETFs and also sovereign gold bonds among others that can be in physical form or electronically. At any time, your entire investment becomes available to you under one roof and helps you know your net worth at a glance.

Makes Easier to go Through IPO Process

The initial public offering has been one of the favorite asset classes of investors for quite a long period. Though, this is still true, even though the process has become much simpler. Then you had to wait for 2-3 months before you could get your share certificates or money back on your IPO investment used in the past. For now, IPOs have to be listed on the third day after the close of the IPO. Therefore, allotment is done the next day and Demat credits and refunds are done in 2 days. That leaves more funds at your disposal, which can be churned faster.

Your Demat Account is Safe

Initially, there was doubt about Demat because all physical certificates were converted into Dematerialised form, but people realised that it was actually much safer than that. Firstly, your holdings are held by NSDL or CDSL, which are some of India’s largest institutions. Also, there exist several technology checks and balances that protect your Demat account safely.

Handling Corporate Actions and Instructions is Simple

This is one thing Demat has actually accomplished. No more messy refund orders to be sent to the bank. Today it’s all electronic. The DP uploads the data to the registrars of eligible shareholders and then it’s an electronic.” Dividends go straight into the mandated bank account. Stock splits and bonuses are credited automatically into your Demat account, even for rights or buybacks, where there is no need for manual intervention. Furthermore, when you want to change address, telephone number, email id; you only give one instruction to the DP and all these securities get changed in that manner.

Simplifies Investor Nomination Process

Over the last few years, SEBI has always underscored respecting nomination as well as appointing nominees as being critical. If all your investments are in the Demat account then you only need to make a single nominee for the Demat account which applies to all equity and non-equity holdings that are present in this Demat account. This process is much easier.

Various Methods of Accessing Your Demat Account

The best part of a Demat statement is that it is very easily accessible. You can open your trading account on the PC and access your Demat statement. This can also be accessed on mobile using an app. In addition, at any moment it’s possible to call up a call center and download a statement of account. Moreover, the investor or Demat account holder for greater authenticity can also visit NSDL or CDSL website and get their authentic latest Demat statement from there as well.

Conclusion

A Demat account is very beneficial for better management of your investments. It makes doing transactions easier and reduces paperwork thereby giving you real time access to the market and protecting against losses, hence an important tool for investors in contemporary times. Instead of going through problems related to security handling, you can choose to open a Demat account which will give you greater control over your portfolio. So, adopt this approach and optimise your investment experience.

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