Many new approaches have been developed in the field of the financial sector today to make it easier for people to buy and open a demat account. Becoming associated with a brokerage house and obtaining a dematerialised account is one of the rituals that the prospective investors voluntarily follow. This kind of account offer an electronic medium of your securities, therefore no need for share certificates. Now, let us discuss what demat account means, its relevance in today’s trading, and how both conservative as well as aggressive traders and investors can reap better benefits over the Indian stock business platform on the grounds of having and operating demat accounts.
What is a Demat Account?
A Demat account is convenient and versatile in handling financial securities for the investors. Thus all the problems which are related in holding the physical certificates like losses, theft, forgery etc are eliminated with the help of Demat accounts as they have greatly changed the Indian stock market model by providing the services of paperless trading and settlement of transactions. Some of the leading depository participants are banks, financial institutions and other stockbroking firms who have been nominated by SEI. Demat account can hold stocks, bonds, ETFs, mutual funds and much more. Portfolio monitoring can be done online and therefore there is constant monitoring of the portfolios.
Some of the charges include Account opening fee, annual maintenance fee and transaction fees for credits and debits. General advices so that you are fully aware of the tax implication that may be as a result of the type of gains which may be short term or long term capital gains. In total, dematerialised accounts have altered the landscape of investing, allowing more than a few million Indians interested in investment instruments to effectively maintain and manipulate their investment portfolios. The ease, openness, and safety make demat the popular method of participating in financial securities in India.
The Evolution of Demat Accounts
The demat account for trading in the stock market was introduced in India in the year 1996 but operated earlier on physical share of the stock certificates.This system has some problems such as certificated losses, theft or destruction, slow transfers and settlement. The dematerialization of shares has greatly reduced paperwork, eliminated several opportunities for fraud and has made the whole trading process efficient. Currently demat account plays an important role in the Indian financial system for over millions of trades every day.
Key Features of Demat Accounts
Demat account has some features which has made become important to investors in this world today. Firstly, they help to approach the management of the company’s portfolio because they give an option to see all the investments in one place. Secondly they allow for the real time transfer of assets in the trading process thus facilitating efficient contract enforcement. Also, convenience is seen in that demat accounts provide more security through encryption and several factor authentication. There are several value added services offered by demat account providers these are real time market tracking, research reports and portfolio tracking etc which assist investors to take right decisions.
How Demat Accounts Work
When you place a buy order through your trading account, the shares are automatically transferred to your dematerialized account if the trade is successful. In the same way, when you sell your shares, they are eradicated from your demat account. This leads into a convenient flow between trading and demat accounts hence making the transactions very efficient. Hence, the depositories, NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) keep records of all the dematteries and their transactions, to keep the system clear.
Benefits for Day Traders
Especially useful for day traders, demat accounts entail purchasing and selling of securities in the same trading session. Transactions that are executed electronically can be carried out in a short time, which is essential in making the most of short term trends in the market. Also, short selling of borrowing shares and selling them with an expectation of repurchasing at cheaper price is also easier through Demat accounts. Furthermore, viewing the real-time portfolio values and transactions, the day traders are in a position to make correct decisions within a very short span of time within the fast converting market.
Advantages for Long-term Investors
To the long-term investors, the demat accounts provide the following benefits. They also abolish the need of having to store the share certificates safely and other documents which may disappear or get damaged. Demat accounts also help it easy to embarked on Corporate actions for example dividends, bonus scripts and rights issues since these are credited to the account. In addition, the fact that the documents are in electronic form make it easier for investors to monitor performance of securities in their portfolio, as well as plan for the future depending on their investment portfolio goals.
Choosing the Right Demat Account
While choosing the demat account service provider the investor should have into consideration cost of account opening and management, charges for transactions, and customer service. However it is also necessary to assess the trading platform interface as well as a number of research and analytical tools available. Most trading accounts come in tripartite savings trading, and demat accounts; this way, it is easier to have them all together. In evaluating the various players in the market, the investor must ensure that he/she takes time, make comparisons and find a suitable demat account that will suit the investor based on the investor’s frequency of trading, investors goals and financial capacity.
Conclusion
In the current environment of technological advancement a demat account has become an important requirement for anyone who wishes to engage in the Indian stock market. In the current world, the good news is that free demat account opening is possible with any of the many service providers in the market. The features of demat accounts used effectively, traders achieve highly convenient, safe, and effective transactions that create the best conditions for successful investment activity. This is the reason why demat account is up to date in the midst of transformational changes in the financial market to help investors in stock trading.