We all have been hearing and learning since childhood that saving is a very good thing. Therefore, everyone should save and as far as the traditional pattern of saving in India has been, it has been through FD i.e. fixed deposit. But with time, there has been a major change in this traditional saving pattern as now instead of FD our interest in investing in new options like stocks and shares has increased and this interest is increasing rapidly and that is why Demat. The number of account holders is also increasing rapidly. When you want to invest in the stock market, a demat account will be necessary, but the question is whether it is a demat account. And why is it so important?
If I want to invest in shares, how do I open a demat account and what are the important things I should keep in mind at this time? So let’s start and first know what a Demat account is. Demat means Demat Realization and it means electronic format. This means that a Demat account is an account in which you can hold your shares and securities in electronic format for online trading. And now you know the meaning of trading in the stock market. That means buying and selling shares. In demat realization, your shares and certificates which were in physical form will be converted into electronic form and their accessibility will also increase. This electronic format is more secure than the physical format used earlier and is also less time-consuming. It is exactly like your bank account, in which you can make your deposits, and the debit credit balance is maintained in the bank passbook. Similarly, when you buy or sell shares, it gets debited or credited from your demat account.
You can understand that just like a savings account keeps your money, similarly, a demat account keeps your investments like stocks, bonds, and mutual funds in one place. It is not that you can open a demat account only with shares, but you can open this account even without shares and maintain a zero balance in it. However, for this, you have to understand the conditions attached to it and take appropriate action. You can also have more than one demat account. But to maintain multiple accounts, you will need justification and you can maintain only one demat account with one broker.
Let us now clarify a little more about why a demat account is required. This is because without this account you cannot buy and sell stocks. Without this, you cannot invest directly in equities and SEBI has declared a Demat account mandatory for transactions in listed company securities. Why was there a need to do this? It fell because the process of buying and selling shares used to be a lengthy paperwork process and fraud in the entire process was also rampant. This means that the investor who wants to trade online must have a demat account and if you are already investing in shares and you have physical certificates i.e. paper certificates, then you can activate your demat account. After. Later you can also convert these paper certificates into digital format. And when your physical share certificates are converted into electronic form, it will become easier for you to access them from any corner of the world. Your time will be saved and security will increase if you want, you can also open a three-in-one account, in which the bank account and trading account are linked along with the demat account. Still, if you think that what will be the benefit to me by opening a Demat account, then let us also tell you that a Demat account also provides a share transfer facility and loan facility.
Now you can enjoy the convenience of Demat receipt and re-discounting. That means, if you want, you can convert physical shares into digital ones and if you want, you can get your electronic securities back in physical form. Along with making trading easier, you can also track it. You can also freeze your demat account for a certain period. You can access this account from multiple touch points i.e. mobile, tablet, PC, and laptop. If you have a demat account that offers so many benefits, it is a profitable deal. In such a situation, you should also know the names of India’s top trading platforms i.e. popular online stock brokers, with whom you can open a demat account. Like now stock was zero, Angel Broking five paisa, ICICI Direct, and Sherkhan Chitra.
And now it is important to know how to decide which would be the most suitable broker or trading platform for me before opening a Demat account. For this, you have to pay attention to very small things like how much the DPE i.e. Depository Participant is charging for account maintenance. What are the annual maintenance charges, transaction costs, and conversion charges on your selected platform? Is your DP broker’s trading software user-friendly or not? How is the backend support of your broker? Does it have a readily available customer support team that can resolve your issues immediately? The platform you are choosing should not only have a strong investor base but also have a good presence across the country. Now the account opening process of the DP you are thinking of joining is easy, paperless, and quick, right? How many types of brokers are there? Discount brokerage or full-service brokers like Farokht, Five Paisa Stocks, Discount Brokerage and ICICI Direct, HDFC Securities, Kotak Securities, Sherkhan, Motilal Oswal.
Angel Broking Extra is a full-service broker. The discount between brokerages is very low because you trade yourself. Whereas in a full-service brokerage, apart from offering you a trading platform and a trading account, you are also given guidance and advice. Therefore its fees are also high. You should choose a well-established demat account provider to reduce the risk of fraud. Account opening charges should be compared as some service providers open accounts with zero charges, while some charge ₹200 to ₹400. You should also choose your nominee as the name of the nominee has to be mentioned while opening the demat account.
As per government guidelines, you can open a demat account and trading account with two different brokers. But you should choose a broker that offers both services to make trading easier for you. Your broker or financial partner should have a product range in which he can offer you a wide range of financial products including derivatives, zero-income bonds i.e. Government of India bonds, fixed-income products, and mutual funds other than shares.
Now it is known what things you need to keep in mind before opening a Demat account, but now let us also know what documents will be required to open this account so that you can easily do it without any haste and hassle. Can open this account. , So see. To open a demat account, you must have proof of identity such as driving license, passport, voter ID, or Aadhaar card. There must be proof of address, which may include a recent utility bill, passport, and Aadhaar. Proof of income is required. When you want to enter into specific transaction types like derivatives, and futures options. For this, salary proof, recent income tax return proof, and bank account statement may also be required. Proof of bank account into which canceled check or recent bank statement can be deposited. A PAN card and a recent photograph will be required. Well, you should also know that the primary demat account requirement is that you must be eligible to open a demat account and four categories of individuals are eligible for it.
Number one resident individual number two Hindu undivided family. Number C companies means domestic number. non-resident Indians. If you are opening a demat account as an NRI or a Hindu Undivided Family, you will need to add additional documents to prove your status and eligibility. And now after these requirements, let us know about the process of opening a demat account, which may vary from broker to broker. But you will get the same details. The first step is to open a demat account and choose a depository partner that matches your needs. Banks, stock brokers, and online investment platforms provide DP services in India. DP means an agent of depository or registered stockbroker. And what is a depository? It is an institution or organization that holds the securities of an investor through a depository participant and also provides services related to these securities and the example of this is now the DP of Stock CDSL and NSDL. CDSL i.e. Central Securities Depository Limited and NSDL i.e. National Security Deposit Limited are two depositories of India.
That means if you open your demat account in stock then now you will open a demat account in CDSL or NSDL through stock. Understand, that this is the second step. Visit the official website of the DP of your choice fill out the demat account opening form and appoint a nominee for your account. The third phase is to do away with KYC norms. The fourth step is KYC documents. Submit scanned copies of documents including ID proof, address proof, bank account details, and income proof. The fifth step is to submit the form. After this, there will be a verification process, which is called IPV i.e. Enforcement Verification. This DP can be done online as well as offline. In case of offline verification, you may have to visit their office. The sixth step is that you have to sign an agreement with the DP, which will contain the duties and rights of the DP and the investor. The seventh step is that the DP will check your forms and documents and after that, your demat account opening request will be approved. The eighth step is, after the process is completed, you will be issued a unique Beneficial Owner Identification Number i.e. BO ID, through which you will be able to access your demat account online.
Thus your demat account will be opened, from which you will be able to keep your shares and securities safe and when you place an order to buy any stock, the shares will be credited to your demat account and they will be available to you when you want to sell them. The Demat account will be debited. But there is still one more point missing for trading and that is the trading account. If you want to trade then you also need a trading account, as the demat account will hold your shares and securities. However, buying and selling shares in the stock market will require a trading account. You will be able to trade through both of these accounts. A trading account is a bridge between your bank account and stock account i.e. demat account. You can transfer points from your bank account to this trading account and make transactions. For trading, you have to transfer money from your bank account to the trading account and when you buy stock from the trading account it will be added to your demat account and the amount of this purchase will be debited from the trading account. Similarly, when you sell a stock, it will be debited from your demat account and the amount will be credited to your trading account.
That is why brokers offer trading cum demat accounts and it is better to open this type of account than opening both accounts separately as both the accounts are closely linked to each other. Yes, but there is no mandatory condition that they should be opened together. There are many situations in which a demat or trading account alone is sufficient. Both accounts are mandatory for trading in stocks, while in other situations it is not necessary to have them together. Let’s take a look at these too. Only a Demat account will be enough for you. While you should keep government bonds, institutional bonds, or gold bonds in your demat account, do not sell them. When you want to invest in an IPO and hold it.
When should you convert your physical shares into electronic form? When you as a nominee have to receive shares through automatic transmission. Similarly, if you deal with the PIN segment i.e. futures options, a trading account will suffice for you as they are settled in cash. It does not require the delivery of shares. Therefore there is no need for a demat account. Now you will know what happens to it in our upcoming video. That is, if you want to keep the stock then a demat account is necessary and when you want to sell it then a trading account is necessary. Simple right?
After knowing about the Demat and trading account, there is still one very important thing for you to know related to the Demat account and this is also the advice of experts. So let’s know about this also. Experts suggest that if you are not using the demat account for a long period, it should be frozen, making it unavailable for operations and transactions, thereby preventing scams and misuse. You can freeze and unfreeze your account whenever you want by submitting the relevant form and if you should not freeze it and your account comes to Dr. Ramesh State then you should keep tracking your demat account so that no one else knows about it. Couldn’t walk. It is a useful activity. This doormat account is an active account, through which you cannot make any transactions until you reactivate your document account. It can become a target of stock brokers who misuse it and you have to suffer the consequences. So it would be better if you keep your demat account active and if your demat account is not going to be in use then close it instead of letting it go to the domain so that there is no security risk and you do not have to pay maintenance.
These are two things you should know while closing your demat account. First of all, when there are no shares in your demat account and you do not want to hold any further shares, close the demat account. Secondly, when you want the shares to be present in physical form in your demat account, you can submit the account closure form to the DP and choose to re-update and have your shares in physical form i.e. in paper form. Can get it. For this. You will also have to complete some more formalities and after that, your account will be automatically closed. Similarly, when to freeze a demat account? The answer is that for this you need to know that there are two types of freezing, regulatory and voluntary freezing. The regulatory freeze will occur if there has been no transaction in your account for more than three years or you have not submitted any information like an Aadhaar card. In such a situation, no transaction can be done from the frozen account. Apart from this, there may be many other areas. Similarly, there is also voluntary freezing which is in your hands.
That means, you can freeze your demat account or some of its features as per your need and you can also freeze it whenever you want by following the process of filling out the form. For example, if you have gone abroad and will not need to use your demat account during this time, you can apply to your broker to freeze your demat account until further notice. By doing this, all dividends, bonuses, and splits received during this freeze period will be doubled and no transactions will take place in your demat account during this period. There may be many more conditions in this. Therefore, you must be aware of closing or freezing your demat account. So friends, in this way you must have got all the important information related to the Demat account. So now you can easily think of opening a demat account using this information and start your journey of investing in shares. And remember to take full advantage of online facilities.