A Beginners Guide on How to Use a Demat Account

If you’re considering investing in stocks and bonds, then it may be time for you to consider opening a demat or dematerialised account. There are a plethora of advantages associated with maintaining such an account. Unfortunately, many people are still unaware about how to open a Demat account. If you’re one of these people, then this article will help guide you. But, before we get into the details, let’s first find out what exactly a demat account is.

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It’s an account that lets you hold deposits and securities in electronic form. This is quite similar to a bank account, but it doesn’t hold any physical wealth. A Demat account provides high levels of convenience and shields customers against robbery, misplacement of certificates, and damage. It provides a cost-effective solution while providing high-levels of security. The money transaction is smooth and eliminates unnecessary procedures like the usage of stamp papers.

To be able to open an account, you will need an internet connection, as this is an online account. It’s essential that you register with an investment broker or a sub-broker before opening this account. You’ll be provided with a transaction password once your account is opened successfully.

Now that you are familiar with the concept, it’s equally important to know how to open an account and utilise it to the fullest advantage. The subsequent points will shed light on this issue and provide complete guidance.

  • The initial step for opening this account will require you to designate a Depository Participant (DP), who will act as the agent to the depository.
  • This is followed by the submission of documents like identity proof, address proof, income proof, and passport-sized photographs.
  • The next step involves carefully reading the terms and conditions. Consider the charges involved before signing the document. After this, a verification process will be initiated by your service provider.
  • Once your application is processed successfully, an account number or a client ID will be provided. This will help you access your account and provide you a platform where you can trade shares and derivatives. This is the virtual place where your stock portfolio will be stored.
  • Hiring a stockbroker is mandatory for buying and selling shares through your account.
  • Note that it takes a couple of days for your stock transactions to be updated in your online account.
  • The onus of transferring the shares to the account lies upon your broker.

In order to trade shares, it’s absolutely necessary to have a Demat account, as buying and selling physical stocks is extremely difficult. Most investors make their trades online, so not having an account would be highly disadvantageous. Knowing the different terms associated with such an account is also important and simply cannot be overlooked. Here are a few specific concepts that you might find useful.

Nomination Facility

You can list any other person as a nominee while opening your account. If for any reason, the main account holder is deceased, then all the holdings in the account will be transferred to the nominated individual.

Investing

This simply means that you have the freedom to invest in a variety of options including shares, exchange-traded funds, government securities, mutual funds, and bonds. You can also invest in initial public offerings (IPO) and systematic investment plans via your account.

Statements

Periodic statements are of great help and will let you keep track of the progress made. Customers have the right to request such statements either in physical or digital form.

Rematerialise Securities

If you want to convert your Demat holdings into physical form, you will be required to fill-out and submit the Rematerialisation Request Form (RRF) to the Depository Participant (DP). This whole process is called rematerialisation.

After you have complete knowledge about how to open a Demat account, consider the other important factors mentioned in this article. Don’t hesitate to conduct your own research and ask for recommendations from experts. This account will be extremely convenient and beneficial for you.