In 1996, the Indian stock markets were forever transformed with the introduction of a Demat account. As trading switched to electronic trading systems, the hassles of physical trading of shares, such as loss, theft, forgery, and so on, were eliminated. A Demat Account is required for traders and stock market participants in the present market. For the advantage of traders and investors, companies are offering free Demat accounts. However, before signing up for a free Demat account, we should be aware of the following advantages and downsides.
1. Increased Security and Safety
One of the most important benefits of opening a Free Demat Account is the protection and security it provides. Because shares were traded in the form of share certificates, the danger of loss and theft was always higher when the shares were held in a physical format. In the event that share certificates are lost or stolen, an investor will face a slew of bureaucratic and operational hurdles in order to reclaim those assets. However, there was no certainty that she would be able to recover. It is safer and more secure to keep the shares in a Demat Account. In the case of a Demat Account, the possibilities of theft or loss of shares are quite low.
2. Settlements that are completed more quickly
Because of the actual mobility of the shares, it took 14 days to settle a trade before they were dematerialized. The settlement period has been shortened from 14 to 2 working days since the introduction of a free Demat Account. This not only saves time for investors, but it also reduces the amount of effort required for trade settlement.
3. Errors are less likely to occur
There were a lot of manual errors in the physical and offline settlement of shares. Vanda, or mistake trades, was a word used to describe these blunders. One of the most significant benefits of a Demat Account is the reduction of erroneous trades.
4. Cost Savings
One of the most significant disadvantages of having a Demat account in the early days was the high cost of opening and maintaining the account. This disadvantage has been resolved with the establishment of a free Demat account. A free Demat account, such as the one offered by Motilal Oswal, has no account opening fee and no annual maintenance price.
5. Cons of a Free Demat Account
There are two sides to every coin. Similarly, a free Demat Account has its own set of disadvantages that the trader should be aware of before opening an account. Some of the difficulties or drawbacks of a free Demat account are listed below.
6. Brokers who are dishonest
These days, all stockbrokers provide free Demat accounts, making it difficult for traders to choose the best one. It's difficult to find a trustworthy broker. As a result, traders should always use brokers like Motilal Oswal, who adhere to the greatest standards of corporate governance and provide 100 percent transparency in their dealings.
7. Changing up your portfolio
With a free Demat Account, trading is as simple as clicking a button. Traders are continually buying and selling shares and other financial assets as a result of the convenience of trading, which has an impact on clients' long-term wealth accumulation aspirations. Because a Demat Account makes trading easier, many investors indulge in short-term trades rather than focusing on long-term wealth growth.
8. Technologically savvy
You don't have to be a technological specialist to comprehend and handle a Demat account, but you do need to be tech-savvy. Investors rely on their brokers to complete transactions, which can lead to broker fraud or misappropriation of cash.
Free Demat Account has its own set of drawbacks. The disadvantages of having a free Demat account, however, are offset by the benefits. Because a Demat account is required to begin stock market trading, traders should do their homework and open free demat account with a broker who has good reviews and can be trusted, rather than avoiding unscrupulous firms.
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