What is the Use of Demat Account?

Digitalization has changed how the world was before. Additionally, It has also affected the different scenarios of the stock market. Traditionally, shares are bought and sold physically. It has lots of limitations and includes buyers and sellers having to meet at one place, resulting in the limitation of the buyer, additionally, it also affects the price of shares. Resulting in complicated dealings within the stock market is the greatest drawback of the traditional approach. Furthermore, it took a lot of time. Making the stock exchange and stock dealings a complicated task.

However, due to digitalization, the process has been completely changed now. To ease the dealings, the process of the stock exchange has been completely migrated online. Now buyers and sellers of the certain will no longer need to gather physically. This process is protected by the Demat account and trading account by the certified stock market depository (NSDL and CDSL).

A Demat account lets you hold your shares and securities electronically, also known as a Dematerialized account. It's like a digital wallet for your investments.

The stock market allows people to invest in companies that they feel can be profitable in the future.

Demat account stands for Dematerialised account. Demat account is the place where all the shares are stored from the time of purchasing to the time of selling the share. Demat account is not tangible but it is an intangible account and can be easily opened within a couple of minutes by giving kind and genuine information to the DP. However, the Demat account should be opened wisely after comparing proper brokerage and leverage and the best among all should be selected.

The documents required for Demat account opening includes Identity proofs, residential proofs and income proofs like Bank statement, ITR acknowledgement, FORM 16, Signed and stamped salary slip.

What Are The Use Of Demat Account?

In India, the Demat accounts are maintained by two depository organisations National Securities Depository Limited (NSDL)and Central Depository Services Limited(CDSL). Demat account is only created in one of these. However, investors have to prepare a Demat account in one of these depositories, however, investors can prepare a Demat account either directly by saving account of a bank or via the broker, or broking franchise.

Demat accounts have plenty of merits or uses. Here’s a brief summary of these factors;

1. Makes Stock Exchange Less Time Taking And Protective

As we talked in the beginning about the traditional method. The traditional method of exchanging stocks is pretty much difficult. The buyer and the seller have to be present at one place physically at the time of stock dealings. Hence, investors or their brokers have to visit the location of the stock exchange. Since the stock market dealings are digitised and migrated on the internet, the procedure of the stock exchange has been boosted 100 times faster. However, it takes 2 days for the shares to be successfully credited to your Demat account

After the successful happening of a stock trade, all the shares of stocks are stored within one of the two depository organisations which are certified and secured under the leadership of the Indian government. Hence, shares are securely stored. Furthermore decentralised account (Demat account) opening processes are not time taking and reliable.

2. Demat Accounts Are Easily Accessible

The owner of the Demat account can easily access all the shares. All the shares are secured within the Demat account, additionally, they are easily accessible is one of the most satisfying use of the Demat account.

Though the Demat account is intangible and digitised, the owner of the share can access to its Demat account any time, and can sit at any place throughout the world. Making it easy to sell and easy to buy any share safely and rapidly.

3. Demat Accounts Provide Variety Of Holdings

Another interesting use of the Demat account is, it is capable of holding a bunch of investments together with equity shares, mutual funds, bonds and exchange traded funds. All these great investments can behold under a single Demat account. Demat account can be opened even if it possesses 0 shares.

Demat account is the one with lots of facilities. However, the depository organisation in which your Demat account is opened also has its very own charge in transactions made by investors. However, the Demat account charges are limited. One has to pay that charge per day, per share only at the time of selling of shares.

4. Demat Account Can Be Quick Monitored

Traditionally the shares held by the investors are in physical form, therefore one of the greatest challenges may be monitoring the current amount of shares. But, Now the shares held by investors can be easily monitored via the Demat account, making the Demat account more reliable. One can easily and quickly monitor the number of shares that he or she is holding per stock stored in the Demat account.

5. Demat Accounts Are Safe

Traditionally, Demat accounts used to appear and transact physically. This results in the risk of theft, loss, and mutilation. However, though the Demat account is digitalised, hence, by holding a certain sum of shares in digitised form, the risks relating to theft, loss and mutilation of share certificates do not exist anymore. There are various more reasons why demat accounts are safer than the traditional physical shares.

6. Demat Account Needs Less Paperwork

Traditionally, the procedure for stock exchange requires a lot of paperwork that is much time-consuming. However, the Demat account is intangible and it doesn’t require much time and hassle of legal paperwork. One of the best use of the Demat account is all the level work of the stock exchange is either completed by the stock market broker or the bank from which the Demat and trading account is opened. Hence, this makes the stock exchange pretty cool and simplistic.

How Demat Account Works?

The working of a demat account can be confusing to understand. Still lets tray and understand it shortly. When you trade through your trading account, the bought or sold shares are deposited in or taken off from your Demat account. When you buy shares, the money is deducted and the shares are added up to your Demat account keeping all your shares 100% safe and secure. On the other hand, if you sold your shares, then your money is received and the shares are deducted from the Demat account.

Summing Up

• At the time of stock exchange, from the time when shares of certain stock have been to the time when they are sold, is stored in a Demat account.
  
• A Demat account is a place where all the shares are stored within the stock exchange process.
  
• The word DEMAT means Dematerialised.
  
• In India, the Demat Account is only made by one of two authorised depository organisations, National Securities Depository Limited (NSDL)and Central Depository Services Limited(CDSL).
  
• One can have an account in both depositories at the same time.
  
• It is mandatory to have a Demat account unless you could trade for stocks for the long term.
  
• Demat Account is easily accessible.
  
• Demat account is less time taking and reliable.
  
• The owner of the Demat account can easily access all the shares. All the shares are secured within the Demat account, additionally, they are easily accessible is one of the most satisfying use of the Demat account.
  
• Demat Account is capable of holding a bunch of investments together with equity shares, mutual funds, bonds and exchange-traded funds.
  
• Though the Demat account is digitalised, hence, by holding a certain sum of shares in digitised form, the risks relating to theft, loss and mutilation of share certificates do not exist anymore.

Conclusion

Demat Account is the most important factor while trading for stocks. 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. Among many of the uses of a demat account the most important benefit is that it's an online storehouse of shares, where all your bought shares and securities are kept safe inside it.