Advantages of Opening a Demat Account

To understand the benefits of how to open demat account, you’ll need to first know how it was trading before these accounts came into being.

What is the definition of a Demat Account?

A Demat account is similar to a bank account, but it is used to store shares. When you purchase shares, they are placed in your Demat account, and when you sell them, they are removed from it. It is a necessary tool for online stock trading and investing.

What Was It Like to Trade Stocks Before Demat Accounts?

Investing and trading were traditionally carried out in person. You had to contact your broker, who would go to the stock exchange on your behalf and complete the transaction. Following that, the broker would receive physical share certificates and deliver them to you, which could take several days.

This was a time-consuming and costly process that required you to take special care of the certificates because physical damage could render them redundant. It was also simple to create and sell forgeries, making it a risky investment.

The Advantages of Demat Accounts

Now consider how Demat accounts have alleviated these issues and made trading and investing in stocks much more accessible:

The ease of online trading: A Demat account allows you to invest or trade online using your mobile phone, laptop, PC, or tablet. You are no longer required to use a broker to go to the exchange, making the process more accessible.

Instant processing: Because Demat accounts are digital, your orders are executed instantly if the terms of your order are met. The share you purchased will then be delivered to you within two trading days, making the process faster and more efficient.

Shares are safe: With Demat accounts, you no longer need to keep physical share certificates because your shares are stored electronically and are therefore damage-proof. You won't have to worry about them getting lost or misplaced.

Less likely to be a victim of fraud: The shares deposited into your Demat account come directly from the exchange, with no intermediary. This system aids in the prevention of fraud and theft, making it a more secure investment option.

Low fees: While a broker is still required to open a Demat account, the fees imposed by online brokers are significantly lower than those imposed by physical brokers, making it a more affordable investment option.

New age brokers, such as blinkX, provide free demat accounts and a variety of user-friendly features to make stock trading simple and accessible to investors.

How to Open a Demat Account

To open a Demat account, contact a stockbroker, who will assist you in setting up the account and providing you with access to the associated Demat apps to begin trading.

You must provide the following documents to open a Demat account:

a copy of your PAN card

a copy of your Aadhaar card

A cancelled cheque for your bank account

Passport-size photographs

Proof of address, such as a utility bill, passport, or driving license.

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