A Demat account lets you buy and sell shares, stocks, and equities in the stock market. As of 2001, the stock exchange in India has gone electronic. The trade is conducted largely via telephone and orders are processed electronically within minutes and even seconds.
If you are a trader, a few seconds can change the whole picture of what a day in trading looks like for you. And to ensure seamless processing of trade orders, it is important to have a mechanism in place that lets you hold and trade in assets conveniently.
Keeping this in mind, the system on Demat (dematerialized) accounts was adopted to make the process of trading electronic. A Demat account can hold all your shares, debts, and equities, all at one place.
In India, you need to have a Demat account to be able to buy or sell stocks, shares, or equities in the stock market, according to SEBI guidelines.
But apart from the obligatory needs, having a Demat account is beneficial in many other ways as well. This is how.
- Paperless transactions
A Demat account lets you hold equities and shares electronically. This process is entirely paperless and hence more convenient to handle.
It also eliminates the risks involved in dealing with paper shares like the risk of losing your shares, physical depreciation, fake securities, delays, displacement, or theft.
- Less Paperwork and reduced charges
Holding your purchased shares in a Demat account means lesser paperwork and a more convenient transfer of securities. It also helps you cut brokerage charges compared to the previous rates of brokerage incurred on paper transactions.
- All your information at one place
A Demat account holds all your information at one place. Information like your address, passwords, contact details, and a history of all your transactions.
Any change in your information linked to a Demat account once notified to the depository participant or the firm that provides brokerage services to you is automatically intimated to all the companies that you hold shares in.
- Direct transfers
A Demat account facilitates direct transfers in case of a credit arising out of a split or a bonus, or consolidation or a merger.
All these transmissions are taken care of by the broker or depository participant and there is no need for the client to take stock of everything happening with each of the companies that they hold shares or equities of.
- Ease of business and remote work
Since Demat accounts function electronically, it enables the traders to work remotely or from home without the need for them to be physically present for every transaction that takes place.
This means that multiple transactions can now be performed in the time that was previously consumed in a non-electronic transaction.
It also helps in trading am odd lot of shares which was a major problem with the previous mechanisms. You can now trade with just one share and still make a profit.
Demat account benefits companies as well as the depository participant system means that they do not have to deal with all their share/equity holders separately and can just interact with the agents for a seamless transaction experience.
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