What is Demat Account & What is the Use of it?

While exploring new investment opportunities, the stock market investment has a significant place in earning high potential revenue. Investing, therefore, becomes the prime need for all the people to transact in the stock market. The stock market or share market makes it possible for people to easily buy and sell the shares sitting at home and gain earnings after proper well-researched decisions. The price at which you buy the stock and at which you sell it results in the profit/ loss for you.

How the Stock Market Works?

To set up a company, the company needs a lot of funding. However, it can’t be feasible only by the proprietor's investment, hence for that one individual or group of individuals are not sufficient to carry on that company and for that, the company comes up with the listing of its company’s share on the stock exchange. Wherein the people who believe if the company would be profitable invests their amount for some amount of shares and in exchange they become the partial owners of that company and receive dividend for that. Some investors also invest for a fixed period and sell within an hour, week, month or year.

The initial investment is good and the company earns good enough then it will attract more investors who potentially invest in the company and the increased demand of the stock results in the increase of the price. The earning through shares can also be done by another technique which is buying shares at a low price and selling the same at a high price. However, there can be reverse impacts if investors found the company not standing on their expectations and they sell their stocks, which results in the downfall of their company value and hence a loss for the company.

The Role Of Demat Account In It?

The Demat account plays a virtual role in each stock market transaction of shares. The Demat account is the place where all the shares which an investor purchases is saved. The Demat account is the most important and mandatory factor while a person wants to invest and earn in the stock market.

What is a Demat Account?

Like before, the shares are no longer available to buy from the physical documents where the investor was forced to do a lot of paperwork and time wastage for buying the share of their respective company. To eliminate the need for the physical meeting of buyers and sellers, the Demat system has arrived. The Demat stands for Dematerialize which is as it performs its function.

The physical shares are no longer available and the Demat account has now replaced it very well by keeping safe your shares by storing them inside it. The Demat concept was introduced by NSE in 1956. Initially, the Demat account took days and nights to get opened but now it can be opened with some clicks.

Dematerialisation

Demat account stands for Dematerialised account. Demat account is the vicinity wherein all the shares are stored from the time of buying to the time of selling the shares of different stocks. Demat account isn’t tangible however it’s an intangible account and can be easily opened within a few minutes via giving kind and authentic information to the DP. However, the Demat account ought to be opened wisely after evaluating proper, brokerage and leverage and the nice amongst all ought to be selected.

The Demat account includes the documentation which includes identity proofs, residential proofs and earnings proofs like bank assertion, ITR acknowledgement, form sixteen, Signed and stamped profits slip.

When you exchange via your trading account, the sold or bought shares are deposited in or taken off of your Demat account. When you buy shares, the money is deducted and the shares are introduced up to your Demat account maintaining all your stocks 100% secure and at ease on another aspect, if you sold your stocks, then your money is acquired and the stocks are deducted from the Demat account.

Is Demat Account Open without Trading Account?

The Demat and trading account may be opened one at a time or maybe opened collectively as there is no statutory compulsion for the identical. You could open a Demat account without establishing a trading account and additionally you could open a trading account without beginning a Demat account, in case you opened a buying and selling account without starting a Demat account, then there you get a limit for your transactions as you may best do intra-day transactions at that length and you can’t preserve your shares for the following day. All you want to do is buy and promote inside the day itself.

NSDL Demat Account

In India, the Demat debts are maintained by using two depository companies, National Securities Depository Limited (NSDL)and relevant Depository offerings restricted(CDSL). Demat account is the handiest created in any such. But, traders should prepare a Demat account in this type of depository, but, traders can prepare a Demat account either at once via a savings account of a bank or through the dealer, or dealer franchise.

What is the use of Demat Account?

The use of a Demat account can be observed when you get to know that you can’t buy a single share online without a Demat account. The Demat account is an online storehouse of shares, where all your bought shares are kept safe inside it. The Demat account eliminates the risk of loss of shares or theft of shares as it was in the case of the physical form of shares and the easily accessible Demat account makes a quick transfer of shares itself. The Demat account is highly useful in Share transfers as the Demat account offers a service of shares transfer after receiving a delivery Introduction slip (DIS).

How To Open a Demat Account?

The Demat account can be easily opened via any bank or any online Demat services provider in a couple of minutes by providing some details for the same. The Demat account must be opened wisely after comparing all the pros and cons whether it be Brokerage charges or annual charges or leverage provided.

Documents Required for Demat Account Opening

The documents required to open a Demat account are

1. INCOME PROOF:

For income proof one may provide

• 6 months bank statement
• A signed salary slip
• Income tax returns the acknowledgement
• Form 16 or any document that proves ownership of assets by self-declaration.
  

2.  IDENTITY PROOF

For identity proof, you can provide

• PAN CARD with photograph
• AADHAR CARD
• VOTER ID CARD
• DRIVING LICENCE
• PASSPORT
• Or any other Identity card displaying the applicant’s photograph
  

3.  RESIDENT PROOF

The proof of residence is also an important document to be submitted.

• Telephone bill/ electricity bill
• Ration card/ licence/ passport
• Bank passbook
• Any other related residential proofs.

Trading Account

The trading account helps you to trade in the stocks where you can buy or sell your stocks. The trading account is as essential as the Demat account; however, there is not any separate view of the trading account. Both Demat and trading accounts are accessible with the same credentials.

How does It work?

Whenever you login into the trading account through your Demat account, You have to add your desired amount of money to be invested in the trading account and then if you want to buy the share then you buy it and the selected one goes into your Demat account. When you sell your share through a trading account, then your money is received and the share gets out of your Demat account. If you are into the only trading account, then you can only go for intra-day trading which means you can only buy and sell the share during that day only, you cannot hold the share without opening your Demat account.

Demat Account Vs Trading Account

A trading account is a place from where you buy and sell the shares whereas a Demat account is a bank from where the shares are taken from or deposited. The main role of the trading account is to allow you the trading whereas the main role of the Demat account is to hold the shares and ensure safety for the same. Opening a Demat account is chargeable ( Charge depending on the DP to DP ) whereas the trading account is free to open. The Demat account can be opened without a trading account and same in another case, the trading account can also be opened easily without opening the Demat account, as there is no legal obligation implied on the investors to open both together.

Summing Up

• The share market is highly risky but highly profitable and the transactions must be done after proper research on each and every aspect of the field in the share market.
• One good step in the share market can result in high profits and on the other side of the coin, the bad one can result in a high loss for you.
• The trading can be started easily by opening a Demat account, trading and bank account, where you buy or sell your shares through trading account and the bought or sold shares are deposited in or taken off from your Demat account respectively.
• There is no compulsion of opening both Demat and trading, however to avoid unwanted consequences one is advised to open together by comparing the brokerage charges and leverage.
• The documents needed must be original and submitted with the utmost sincerity.
• The importance of a Demat account can be recognized when you get to know that you can’t buy a single share online without a Demat account.
• The Demat account is an online storehouse of shares, where all your bought shares are kept safe inside it.

Conclusion

You can begin your stock market journey after deep research and full motivation and the aim to earn high amounts. The risk factor is essential here and you should not be afraid of taking a calculated risk in the stock market. One good judgement can make your life and the other can ruin your life very well.