A Demat account is an account that holds your investments in electronic form. It is similar to a bank account, but instead of holding cash, it holds shares, bonds, and mutual funds. A Best Demat App is required if you want to trade in shares on the stock exchange.
How does it work? When you buy shares, the broker credits them to your Demat account. When you sell shares, the broker debits them from your account. Your shares are held in an electronic database maintained by the Depository Participant (DP), which could be your broker or a bank. You can view your holdings and transactions online anytime.
-The paperless nature of a Demat account makes buying and selling of securities very convenient.
-It eliminates the risks associated with physical certificates such as bad delivery, fake securities, delays, and theft.
-Since all transactions happen in real-time, there is no scope for errors.
-You can hold multiple types of investments in one place. For example, you can have both equity shares and mutual fund units in your Demat account.
-It is easier to track your investments and monitor your portfolio.
-There are charges associated with a Demat account, such as annual maintenance charges and transaction fees.
-If you want to hold physical shares, a Demat account is not for you.
To get a free Demat account, you will have to approach a Depository Participant (DP) of your choice and fill in the necessary paperwork. The DP could be a bank, stockbroker or any other financial institution that is registered with the National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL).
The documents required to open a Demat account are KYC documents such as PAN card, identity proof, and address proof. You will also need to furnish income proof and bank statements for the last six months. The DP may also require you to open a savings account with them.
Once the account is opened, you will be allotted a 16-digit unique identification number (demat account number or beneficiary owner identifier) by the depository. This number is linked to your PAN number and remains unchanged even if you change your DP.
You can hold shares in electronic form by using your demat account number. When you buy shares, they are transferred from the seller’s demat account to your demat account electronically. These shares appear in your demat account statement which is issued by your DP on a monthly basis.