You must Sign In to post a response.
  • Category: Investments

    What are Demat accounts and its uses?

    Looking out for information about Demat account? check out this Ask Expert page for advice from experts.

    I sometimes receive promotional emails and see advertisements about Demat accounts. What exactly are Demat accounts and how it helps in investment decisions? Is there any charge to be paid for maintaining Demat accounts and what are its advantages and disadvantages?
    Awaiting response.
  • Answers

    6 Answers found.
  • Demat account is an account where your shares,mutual funds,gold ETF, bonds and debentures are kept in electronic form.In a savings bank account one keeps the money. A demat account is used to keep shares,mutual funds etc. When someone opens a demat account there will be three interlinking accounts of that person, 1. demat 2. trading account 3. savings bank account. You have to put money in a savings account and transfer it into a trading account to purchase shares. When you buy shares, after two days, shares will come into your demat (materialized account). When you sell the shares money will come to your saving account automatically. After that, you can withdraw your money.

    The greatest wealth in this world is mental peace and good health.

  • 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.

  • Demat account means:- De-materialised account.
    Earlier the shares traded were actually in the physical paper. They were called share certificates. When one bought shares of a company, he got the physical shares and had to keep it safely until disposed. So when a share is traded, the seller has to physically deliver the share certificate to the buyer via his broker and the seller's broker. Thus the transaction gets settled or materializes very late.
    Now the situation is that, shares (and others elected market instruments also) , are not in the physical form. They occur as accounting entries just like a bank account and pass book entry.
    So a Demat account is now mandatory for dealing in stock market. The buying transactions and selling are shown as entries in them with relevant values.

    Advantages of Demat account:

    Demat account is advantageous because the investor need not have to worry about the safe keeping of the stock instrument. He can buy or sell even a single share as the market lot is now irrelevant. Settlements becomes easy as it is just debt and credit entry between the accounts and the demat account entities. Trading in the stock market is easy and fast with demat account as there does not need any physical delivery.

    Disadvantages of Demat account:
    Apart from a trading account now another account also is needed. A third party has to be used for service. Sometimes the investor has to interact with three entities for three accounts: - Demat account, Bank account, Trading account. There are charges involved in that. The enhancing of charges is not under the investor's control. There are maintenance charges.

  • Demat accounts were created to allow mapping of the citizen's stock and the mutual funds inventory under single unique ID. In order to do this successfully there is also PAN card. Demat accounts are regulated by the SEBI guidelines. The purpose of the demat account is to make sure that investment made into the stock market, bonds, mutual funds and gold market is as per the guidelines and the restrictions set by the SEBI.

    Here are some of the advantages of the demat account.

    1. Central account overview for the investment made in NSE, BSE and other investment options.
    2. Option to choose any broker from the available brokers.
    3. Option to switch to any broker at any time keeping the investment intact.
    4. Option to switch fund house any time along with the investment mode.
    5. Makes viewing the investment and transaction easier on single dashboard with brokers.

    And here are some of the disadvantages of the demat.

    1. Fragmented investment often leads to fees issue among different brokers.
    2. No guidelines on how the referrals and the investors are charged.
    3. Demat account is attached with PAN but requires account opening on broker side.

  • Demat Account means Dematerialized Account. It is like a bank account where shares, debentures, bonds and other financial instruments are kept. A person who intends to open a Demat Account has to approach the Depository Participants (DPs) to open the Demat Account. Just like bank statements, the DP will provide the account holders with periodical statements of holdings and transactions in their respective accounts.

    By having a Demat account, the account holder will always get an opportunity to invest in various asset classes and keep the financial instruments in dematerialised form. The account holder is now free from the anxiety of safe-keeping of paper-documents. Moreover, Demat Account has become compulsory in case of stock-trading. Demat Account and Online Trading Account help an investor to invest money in all asset-classes without any hassle.

    Beware! I question everything and everybody.

  • The most exciting feature of Demat account is that most of the investments are in electronic form with the depository participant. It can be accessed from anywhere and traded at ease. The money flow is also streamlined without hassles.
    With a reasonable annual fee this is a nice platform for the investor. For high value and frequent investors it is a boon.

    Knowledge is power.

  • Sign In to post your comments