There was a time when buying or selling shares meant placing an order with your broker over the phone or sending a request through the post. Shares were held in physical form, clearing took many days, and there was always the risk of fraud, forgery, or impersonation. All this changed with the introduction of online Demat accounts in the Indian markets. Read on to learn about the various benefits of Demat accounts.
1. Protects Your Holdings from Damage, Loss, and Theft
When you open Demat account online, your holdings are held in dematerialized form. This means that they are protected from damages due to wear or tear, getting misplaced, or stolen.
2. Safety from Fraud, Forgery, and Impersonation
Before the advent of online Demat accounts, it was not uncommon for physical shares to be forged or for owners to be impersonated using forged documents. A key advantage of Demat accounts is that your holdings cannot be forged nor can anyone impersonate you in the exchanges.
3. Faster settlement
With a Demat account, you can buy or sell shares with the click of a button. A major benefit of Demat account is that not only is the transaction hassle-free, but the settlement is also faster. This means that transfer of ownership and clearing of payment is also faster. Before Demat, settlement used to take a long time but with Demat, Indian stock markets now have a T+2 settlement time, i.e. all settlements are made 2 days after the transaction date. This is a remarkable improvement over the paper trading days. This faster settlement also reduces the risk of fraud making trading safer.
4. Loan Facility
A major advantage of a Demat account is that the securities held in your online Demat account can be pledged as collateral for obtaining loans from a number of banks.
5. Hold Multiple Instruments in a Single Account
With your online Demat account, you can invest not just in stocks, but also in Equity Linked Savings Schemes (ELSS), Unit Linked Insurance Plans (ULIPs), commodities, and Futures & Options (F&O). Moreover, you can also track and compare the performance of all your investments on a single screen with the help of your online Demat account.
Online Demat accounts offer several benefits. They protect your holdings from loss or damage, enable easier transactions, allow faster settlements, enable you to access loans, and safeguard against Demat Account fraud and forgeries. Given these advantages of Demat account, they have almost completely replaced paper-based trading in India. If you wish to invest in equities, it is advisable that you do thorough research into the risks associated with equities, and only open an online Demat account with a reputed broker.
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