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4 Advantages and Disadvantages of Holding Two Demat Accounts

10 Apr 2024

Investing is not an easy task. In fact, before potential investors and traders step into the intricate and often confusing world of investment, they stop to think. However, nowadays, with a lot of exposure to credible resources and financial portals, investors and traders can get all their queries answered. When people begin to invest, they have to first open a Demat account. This is done to hold the investments and assets in electronic form after an investor/trader makes an investment. The Demat account is also connected to a trading account and a bank account to make trading, investing and holding assets seamless and smooth. There are numerous questions that new traders have when they begin their trading journey. Among the many questions, a prominent one that keeps popping up repeatedly is whether it’s possible to have two Demat accounts. Can two Demat accounts be opened? Is this a possibility? If it is, what are the advantages and disadvantages of holding two Demat accounts? Also, what problems or legal hurdles should one expect later down the road due to holding two Demat accounts? This article aims to answer all of those questions in more detail.

Can I Open More Than One Online Demat Account?

Can we open two Demat accounts? And can a single Demat account holder open another Demat account in the same name? The short answer to that is a big yes. If you currently hold a Demat account and you wish to open a second one, there is nothing stopping you. In fact, there is no limitation on the number of Demat accounts you can hold at one given point. Nevertheless, before you start acquiring multiple Demat accounts, it's first essential to understand the implications of having more than one account. Holding accounts comes with responsibilities on the part of account holders, not to mention charges. If you open more than a single Demat account, you should be prepared for bearing whatever costs there may be involved. 

Why Open more than One Demat Account?

A Demat account works a lot like a savings bank account. In the same way, we use more than one savings account to save and invest our money, multiple Demat accounts help us to diversify our investments by storing money in different accounts. In case you hold different kinds of assets, you can store them in segregated Demat accounts, making your investments more organised. Every Demat account is linked with a PAN card; hence, every equity/asset that you invest in will be considered as your investment as it's linked to your PAN card. Another thing to note is that you can open one Demat account with one broker. If you wish to open a second Demat account, you would have to approach a second broker. When you ask the question, “how many Demat accounts can I open?”, you may do so without thinking of the fact that you have to deal with different brokerages. 

Advantages of Multiple Demat Accounts:

1. Portfolio Segregation: Having more than one Demat account can help you segregate your portfolio efficiently. You can maintain separate trading and investment portfolios; for instance, long-term investments & short-term/frequent trading in different Demat accounts. If you consider the fact that some people invest in many investment products, several accounts help keep these categories more organised, and investors are not prone to get confused. They are also able to keep a track of different assets in varying Demat accounts. This enables investors to monitor assets and rebalance portfolios with convenience and ease. 

2. Research and Analysis from Different Brokers: Having multiple Demat accounts will also give you multiple perspectives on buying and selling stocks. This can be in the form of research and access from multiple stockbrokers, or even the user interfaces used by brokerage companies.

3. Safety: Your securities are secure in electronic form in your trading accounts.

4. Widen Your Portfolio: You can widen your portfolio by adding Demat accounts along the way. This move will also go a long way in enhancing your reputation in the market. For instance, if you want to invest in an IPO down the road, a diversified portfolio fueled by multiple Demat accounts can be the golden ticket. This is true even for government securities. 

Disadvantages of Multiple Demat Accounts:

1. Opening Demat accounts multiple times will invite additional changes like annual maintenance charges and others. This will, hence, increase your overall trading expenses. Can we have multiple Demat accounts but avoid heavy charges? If you want to save as much as possible, you can have more than a single Demat account, but consider the charges of each brokerage that you sign up with. While one brokerage may charge you hefty fees, another may not. 

2. Keeping track of multiple Demat accounts can be tricky as each broker offers access to trading platforms which can be confusing to figure out.

3. In the event that your Demat account remains inactive for a specific period of time, your broker may freeze your account. Although your stocks can be recovered, the process may be described as a hassle.

Final Thoughts

The benefits of having more than one Demat account clearly outweigh the disadvantages. If you are an experienced investor, having the benefits can go even further, especially when making calculated decisions. If you are looking to open Demat account online, the process is relatively simple and can be done in a few minutes. Happy trading!


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