Before the introduction of the demat account, the entire trading process was carried out physically through agents or brokers. As it involved transactions using physical share certificates, inconsistencies and frauds were often reported in the stock market. However, when the physical certificates were dematerialized and converted into electronic format, most of these issues got resolved. Eventually, the demat account holders were able to participate in online trading by themselves with minimum or no intervention by the brokers.
Some of the unique features offered by the demat account include:
Safety of the securities
Your demat account can be considered as a digital wallet where you can store all the securities in digital form. This not only reduces the chances of forgery or theft but also reduces the chances of damage associated with physical securities.
Instant execution of trades
You can buy and sell stocks in real time through a demat account. It allows you to take advantage of the volatility of the market by taking favorable positions.
These days, depository participants also offer a 3-in-1 account that provides access to demat, trading, and bank accounts via a single platform. Therefore, fund transfers happen instantly, and as a result, the entire trading process gets accelerated.
Access to the latest market news
Today, most stockbrokers provide an online trading platform that allows you to access the latest market news and events. These details help you to fine-tune your trading strategies.
No need for a minimum balance for trading
A demat account does not work like a bank account. It means that you don’t have to maintain a minimum balance of funds or securities to trade.
Benefits of demat account
The crucial benefits of demat account are highlighted below:
1. Faster settlement of securities
Initially, it took weeks to settle the trades as they were executed manually. The trades get settled quickly now because of the demat account. Upon successful execution of the buy trade, the stocks get credited to your account in T+2 days. When you sell the securities, they get debited from your account, and the funds are available for withdrawal after the trade settlement.
2. No extra stamp duty charges
When shares were traded manually, it required a lengthy documentation process, and the investors had to pay a significant amount as stamp duty charges. The stamp duty charges were eliminated completely after the introduction of the demat account.
3. Hold multiple instruments in one account
A demat account allows you to trade in stocks, futures and options, currencies, commodities, and other asset classes. You may also invest in mutual funds and ETFs through a demat account. It means that you can grab the earning opportunities offered by the stock market and hold multiple financial instruments in one account.
It is also possible to open multiple demat accounts. However, each account can cost you additional AMC (Annual Maintenance Charges), translation fees, and other demat charges. Therefore, you must pay the brokerage charges and demat charges before you open a demat account online.
4. Safety from frauds and damage
Securities that are held digitally are far safer than physical securities. Although online intruders can use malicious programs to steal them, demat providers employ the latest data encryption technology and security features to safeguard your investments.
5. Easy monitoring & access
You can use your demat account to monitor the investments closely. Moreover, you can download the account statements to cross-check each and every trade. The availability of trading apps allows you to participate in trading from any country at your convenience.
6. Option to invest in international markets
You can also invest in foreign stock exchanges from a demat account nowadays. For instance, it is possible to invest in certain US stocks through NSE IFSC (National Stock Exchange International Financial Service Centre). Some stockbrokers allow their customers to invest in international markets.
