Demat Account is an account that is used to hold shares and securities in electronic format. The full form of Demat account is a dematerialised account. The purpose of opening a Demat account is to hold shares that have been bought or dematerialised (converted from physical to electronic shares), thus making share trading easy for the users during online trading.
What is Demat account?
A Demat account (short from dematerialised account) allows you to carry shares and securities in an electronic format. It helps you to carry certificates of mutual funds, bonds, stocks, ETFs, etc. It operates a bit like a checking account during which the account will get debit once you sell shares and it’ll get credit once you buy shares.
You need a demat facility because:
The trading of shares and securities isn’t possible without having DEMAT account.
You cannot invest in shares without having this account.
As mandated by SEBI, you can’t store physical certificates of stocks. It are often stored only in electronic format.
Thus, this is often the importance of getting a demat account.
What are the advantages of opening a Demat Account?
Decrease in costs
It decreases the value of holding the physical share certificates. It also decreases the value of stamp tax , handling charges, cost of paperwork, etc.
The demat facility is extremely easy to use. you’ll use the mobile application to shop for and sell shares easily at your fingertip.
Lower risk of theft
The risk of theft and robbery is next to zero if you employ the demat facility. The shares are stored within the electronic format which minimizes the danger .
Speedy transfer of shares
The shares are often bought and sold easily without the subsequent the method of the paperwork. The time interval is extremely low because the transfer doesn’t happen through the physical share certificates.
Easy to access
It is easy accessible from all kinds of electronic devices like mobile, desktop, laptops, etc.
Easy to trace investments
allows you to trace your investments and their value easily in order that you’ll take an informed decision.
Types of Demat account
There are three sorts of demat account:
Regular Account: a daily account for investors in India
Repatriable Account: it’s designed for NRIs with a requirement of NRE checking account .
Non-Repatriable Account: it’s designed for NRIs with a requirement of NRO checking account .
What is difference between trading and demat account?
The demat account acts as a space for storing once you can store your shares and securities. It acts as a checking account where your shares and securities are deposited. it’s a reserve for your holdings. the aim of this account is medium-term and future investments.
While the trading account helps you to shop for and sell the securities within an equivalent trading session or on an equivalent day. It helps you to try to to intraday trading. It facilitates an efficient flow of transactions in every trading session.