Demat account, which is also known as Dematerialized account, is needed to buy and hold stocks, futures and options contract, and other financial instruments in electronic form. When you buy the above mentioned financial instruments, it is reflected in the demat account and when you sell these financial instruments, the shares or F&O contracts, etc. are debited from the demat account.

Who Can Open a Demat Account With Indian Brokers?

In India, resident individuals whose age is 18 and above can open a demat account. Additionally, NRIs, minors via guardian, Hindu Undivided Families (HUFs) can open demat accounts.

Further, corporate demat accounts can be opened by public limited companies, private limited companies, limited liability partnerships (LLPs), partnership firms, trusts and societies can open demat accounts.

All these entities must have a valid PAN and comply with the required KYC rules with specific document needed for each type of entity.

Benefits of Demat Account

Electronic Form

When financial instruments are stored in dematerialized form, it is held in electronic form and it can be accessed through the platform provided by your broker. All you need is an internet connection, a smartphone or computer, web app or mobile app and the login credentials provided byyour broker.

Ease of Use

With discount brokerage companies rising in India, a lot demat account have been opened. All stock broking service companies provide their own web app and mobile app. You can open a demat account within a few minutes right from you home. No need to visit any office. Even account verification is done online. This has led to crores of Indians opening a demat account and a few have more than one demat account.   

Buying and Selling

With demat account, it is so much easier and faster to buy and sell shares, futures and options contracts, etc. This was not the case with physical shares. With physical share, it would take a few weeks for this process to be completed.

Adding Funds

These days, demat account, trading account and your bank account are all linked. So if you want to add funds or if you are short of funds to buy a share or derivatives contract, you can easily transfer funds from your bank account and start trading and investing.

Liquidity

Since more demat accounts have been opened compared to a decade back and it is easier to buy and sell stocks using a demat account, more liquidity has been created in the overall market. It is also easier to receive your money when you sell your holdings. Without a demat account and you holding a physical share, this would have been difficult and lengthy process.

Risk

If you have your holdings in physical form, there is always a risk of it getting lost or damaged. This is not the case if you have your holding in dematerialized form. Even of you forget your credentials to access your demat account, it can be easily recovered or reset. This is the advantage of a demat account over a physical share.   

Adding Nomination

If you have a demat account, it is easy for you add a nomination and change an existing nomination. Adding nomination is important because it is easy to transfer your assets in case of any unfortunate event. Without a nominee, it will become too complicated to transfer your assets. You may have to submit a lot of documents like death certificate, succession certificate, etc. which are time-consuming and expensive. Updating the nominee ensures smooth transfer of assets, avoid any disputes, save time and legal costs.

Margin Trading Facility

If you have a demat account and holding stocks in the account, it will be easier to pledge the securities and get higher margin for trading or investment through margin trading facility. Without a demat account, this would be a tedious process and inefficient.  

How To Open a Free Demat Account

You can easily open a free demat account with Aetram Trades by clicking the link

The account opening process is completely online and it takes only a few steps to open the account. All you have to do is be ready with the necessary documents. To know the steps and account opening process, click here 

Conclusion

If you are a trader or an investor, having a demat account is very useful in this digital age. You will be able to buy and sell securities with ease and it will also save a lot of time and avoid confusion. It is more safe and secure to hold the shares, F&O contracts in electronic form.