What is a Demat Account? And how can you opt service of free demat account opening, in Jaipur?
Initially, stocks and shares used to be exchanged via physical receipts called certificates. However, this resulted in lengthy paperwork and took up a lot of time. To counter this and to take advantage of an electronic trading platform which was gaining traction in West and the Asian Markets, the process of dematerialisation (demat) of shares was initiated in 1996. Physical share certificates were converted into electronic form securities of equivalent number and price and were credited to the investor’s demat account. Thus, the advent of trading commenced this way.
In a more simplistic approach, demat accounts allow the investor to buy and sell as well as transact not only shares and stocks but other products conveniently without the need of any sort of paperwork.
You can opt service of free demat account opening, in Jaipur by registering with a Stock Broker from investmentsahihai.com.
Why you need to Open Demat Account?
Such accounts are of crucial importance today because, the entire financial platform of investing, trading and maintaining have become digitised. Hence, to enable the user with a seamless and straightforward experience, demat accounts are the necessity of the day. These accounts are essential to trade in India’s stock exchanges. Although SEBI – Securities and Exchange Board of India, has permitted traded up to 500 shares to be settled in the physical form, it is not a preferable option these days since it causes excessive inconvenience of maintenance and tracking.
This account retains certificates of financial instruments such as shares, bonds, government securities, etc. Thus, the dematerialisation account aids the investor to maintain their investments systematically as well as concedes an easy movement to buy and sell any products they desire.
A Demat account is more than just an account to hold securities. Through digitisation, it adds to market transparency and better regulation.
Investing in physical shares is a lot of paperwork together with a lengthy procedure and a high risk of receiving fake shares. To keep this entire process simple and streamlined, an investor should choose to open a demat account.
Online trading, enables the shares and securities to be held in such an account in dematerialised or electronic format. Dematerialisation is the process of converting the physical share certificates to an electronic form to increase its accessibility
As per SEBI guidelines, such accounts is mandatory for every shareholder who intends to trade in stocks and shares and other products.
Hence, to settle trades electronically, an investor requires a specific demat account number.
It is a similar concept to that of a bank account; wherein there is a record of the debt and credit of the balances maintained in a bank passbook. Likewise, when a purchase or sale of a share is undertaken, it will be either credited or debited to or from the account respectively. Thus, holding a such an account allows the investor to buy and sell shares or any other product and hold them safe and sound.
A demat account can be used to retain several investments like shares, stocks, index and gold, bonds, Government securities, initial public offerings(IPOs), Exchange traded funds (ETFs), non-convertible debentures(NCDs), mutual funds, etc. which are traded on the exchanges. You can open a demat account without owning any shares or products together with maintaining a zero balance account.
FUNCTIONING OF A DEMAT ACCOUNT
All your shares and investments namely securities, bonds, mutual funds, government securities, ETFs are held either in electronic or demat form in your demat account. It is imperative to understand the process and bodies involved with the working of such an account. Below are the main functions of a demat account :
- Depository: at present, two depositories are registered with SEBI (i) CDSL – Central Depository of Securities Ltd. (ii) NSDL – National Depository of Securities Ltd. These depositories hold your demat account on your behalf. The working is similar to that of a bank.
- Depository Participant(s)(DP): is an agent of the depository through which it interfaces with the investor. Financial institutions, scheduled commercial banks, foreign banks having operations in India approved via RBI – Reserve bank of India, stock brokers, clearing corporations or houses, state financial corporations, NBFCs, share transfer agent, etc., complying with the conditions proposed by SEBI can be registered as a DP. Banking services can be availed through a branch; however, depository services can be availed via a DP.
- Portfolio Holding: the demat account enables you to view your portfolio holdings of investments every time a transaction is undertaken. Since it is an automated process every purchase and sale is recorded with the minutest details of price, date of purchase or date of purchase, quantity etc.
- Unique ID: every single demat account has a unique verification identity number. This is used during transactions to aid the companies to identify and credit the securities in the specific investor’s account. It is a unique 16 digit number, the first eight digits are the DP id, and the last 8 are the Client Id ( investor account).
FACILITIES OFFERED BY A DEMAT ACCOUNT
Demat account opening offers a wide range of facilities for the investor. Let us look at a few of them below:
- Transfer of Investments: A demat account aids the transfer of shares of an investor. By filling in a Delivery Instruction Slip ( DIS ) with all the relevant investor specifics, it enables an effortless transfer of shares. However, it is not only limited to shares, but various investments or security holding can also be transferred through a such an account.
- Dematerialisation and Rematerialisation: A demat account assists the conversion of securities into different formats easily. By instructing your DP – depository participant for dematerialisation, to carry out the formalities to convert the physical share certificate into an electronic form. On the other hand, the investor can get their electronic security holding converted back to the physical form via the process of Rematerialization, wherein an RRF – Remat Request form is to be filled in by the DP.
- Loan Facility: the securities held in the account can provide the investor his exact and detailed holding to enable him to apply for a loan from a bank or financial institution. The securities can be provided as collateral towards the loan.
- Corporate Actions: Such accounts assist the investor in tracking and maintaining his securities. This is specifically required to monitor split of any equity shares, bonus issues or any other action taken by the companies for their shareholders. These are directly updated in the account.
- Freezing your demat account: Investors are provided the option to freeze your account for a specific period or as per requirement. At times this is undertaken to prevent unexpected activities in the account. However, to avail this facility a particular amount of shares should be present in the investor’s account.
- Speed E- facility: NSDL has provided an electronic facility for their investors to complete a transaction through the submission of an e-slip which is then sent to their DP.
Investmentsahihai.com services provide these demat facilities to their investors and may more convenient and easy methods for trading.
HOW TO OPEN DEMAT ACCOUNT
Demat Account Opening is an easy process with these simple steps :
- Step 1: choose a Depository Participant (DP) to open the account with. A beneficial owner (BO ) account is opened with the depository.
- Step 2: an account opening form is required to be filled in with all the investor details, together with the supporting documentation copies of proof of address, proof of identity, proof of income etc. A PAN card is mandatory to open the account. All documentation should be presented in original as well for verification.
- Step 3: you will be provided with a copy of the rules and regulations as well as the necessary charges to be paid to your DP. An in-person verification will be conducted by a representative of the DP to confirm all the details and documentation provided by the investor.
- Step 4: Once approved and documentation is submitted, your Demat account is opened and operational.
An investor can open the account online in minutes through any bank or financial institution. There are various options available to open the account online; one such option is of investmentsahihai.com.
Things to know about opening a Demat account
The modern online account opening process has made it really simple to open Demat account. In fact, in the current system, you don’t even have to visit the broker’s office for account opening. You can simply fill in the electronic form, update mobile number and email id, and complete KYC compliance with a preferred DP and get a Demat account open under an hour. But as an informed investor, you must get aware of the following.
Documents needed for Demat: You need a list of documents to complete the KYC process. It includes identification and address proof, bank account details, PAN, Aadhaar, and such. You will get a list of documents required for account opening from the DP. Make sure you provide correct documents to avoid your application getting rejected.
Charges: There is an array of fees collected by the broker, ranging from taxes levied by SEBI to operational fees. Charges are a crucial metric to select the right broking house since these are additional costs you would need to bear along with capital fund investment.
Linking Demat: Opening Demat is the first step to invest in securities, but a Demat account is meant to hold the securities during transactions. You need a trading account, linked to your Demat, to carry out trading. You can have trading and Demat accounts with separate broking houses. But it adds to process requirement of transferring scrips from one account to another and transaction time. For faster and seamless transactions, you may open both the accounts with the same broker.
File nomination: Registering nominee to your Demat saves a lot of time and hassle in the future. It is an important step that we often ignore. However, we suggest naming a nominee for your account while opening the Demat.
Additional Features Of Demat Account
These are some of the additional benefits you can enjoy with a Demat account.
Consolidation: It is possible to consolidate different portfolios of the same company to create a new portfolio. You can forward the physical certificates with a letter duly signed seeking consolidation to the RSTA of the company.
Account freezing: There is a feature that allows you to freeze your account, any security, and even any number of securities for a specific period. You can do it to prevent any unwanted action in your account.
Account types: Demat account can take different forms, just like a bank account. You can open a joint Demat account, or in the name of a corporation, multiple accounts, and even in the name of a minor. However, a minor’s Demat account will need a guardian to operate the account.
However, opening an account comes with its fair share of charges which would involve an annual maintenance fee, a transaction fee or commission for every transaction carried out by the DP. Additionally, depending on the DP a fee may be charged for dematerialisation of the shares. But on a brighter side, there are no mandates to sustain a minimum balance. Such accounts can be opened without holding any securities.
PRODUCTS TO TRADE USING ANGEL ONE DEMAT ACCOUNT
It is one account with multiple benefits. Investors can invest in a variety of asset classes through investmentsahihai.com one Demat.
Investors commonly use a Demat account to receive delivery of company equities. Company equities are common shares issued to general investors in the process to raise capital from the market.
Mutual funds are another investment instrument that invests in the market through a pooled fund. The fund manager usually collects funds from several investors and invest in a shared goal – track market and trace winning stocks to buy and sell to retain the fund’s profitability.
FUTURES AND OPTIONS
Investors can participate in futures and options trading and get deliveries on their Demat. Futures are great tools to hedge against rising market volatility and limit risk exposure. On the other hand, options give more flexibility to investors with a no-obligation deal.
Investors can receive delivery of currency contracts in the Demat account. Currencies as an asset-class help diversify a portfolio. In terms of volume, the currency is the largest market where investors can exchange Forex at a future date, at a specific rate.
Commodity trading allows investors to take a speculative position and hedge against changing commodity price. Using Angel One Demat, investors can invest in commodity exchanges like MCX, NCDEX, NMCE, and ACE.
IPOs are excellent to invest in quality stocks at a low price. Find and invest in the best IPO offers using Angel One Demat account.
Easy to Hold
Since the securities are held in electronic form there is no storage risk involved. The DP is responsible for maintaining and safeguarding the investor’s account. An account is one of the easiest and securest forms of holding a securities account. The account also allows the investor to nominate their kin. Automatic transfer of the securities is carried out to the specified nominee.
In spite of the account being a common account for all the securities. The investor does not have to provide their details every time a transaction is carried out through the DP. The account linked to the investor with their Unique Id represents the investor and has all the particulars listed out. Thus, every transaction is automatically updated with the specifics.
Opening an account does not only aid in trading of shares. It also operates for debt instruments like bonds, NCDs, government securities, mutual funds, etc. An investor can hold all the investments in a single account.
The solution to Odd – Lot of shares
With the investor being able to open an account, the problem for investors to transact a single or an odd number of securities has been resolved. Historically, shares were sold in the market only in lots. However, today the investor can purchase or sell any number of shares without any conditions.
Delivery of Risks
One of the greatest benefits of a demat account is the electronic trading process. Initially, there was a high risk for fake shares, theft and wrong deliveries of the securities. The electronic system today will directly credit the securities to the investor’s account automatically, regardless of the quantity and amount of shares.
Presently, a demat account does not require stamp duty for securities. This has resulted in a substantial cost reduction for the investor. Previously the stamp duty was 0.5 percent for each share. However, that is completely eliminated through an account.
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