Demat accounts or Dematerial accounts are used to hold the share of companies in electronic form instead of physical certificate. In our country, it is mandatory to have a Demat account if you want to trade in the stock market. So, it is important to understand how it is beneficial.
There are many advantages of holding a Demat account. The most important thing is that you don't need to worry about the security of certificates to be theft or catch fire. So, you can sleep peacefully at nights. With the help of Demat account you can easily transfer your shares to your dear one. Earlier you had to contact registrar of each company but now you can easily send your share by just contacting your broker and giving him the instructions. Even if you want to sell one share you can which was not possible earlier. If the company issues bonus shared t will be reflected in your Demat account immediately.
Demat account is not only used to hold shares you can also keep bonds, gold ETF in NSE/BSE, mutual funds and shares in a single Demat account.
You can also change your address by just contacting your broker and you don't need to visit registrar of each company.
Along with the advantages, Demat accounts have some disadvantages too.
Like internet banking it is also prone to fishing and fraudulent activities
If you have not proper knowledge about it then its obvious that you will depend on some other to manage your accounts and in most cases its broker. So, he can also misuse your accounts. Also, Demat accounts does not come free of cost. Your broker will charge for maintenance of account on yearly basis. Maintenance charge varies from broker to broker. Even if you are not holding any thing in your account, you will have to pay the charge. So, it is suggested by many to close your Demat account if you have no future plan.