If you wish to be a stock market trader, you would first need to consider opening a Demat account. Demat is the short form of dematerialisation wherein physically held shares are converted into digital format. A free demat account opening comes with its own benefits and disadvantages. Read on to understand the advantages of Demat account and the demerits of Demat account before you begin your journey into trading.
1. Costs: Holding a free Demat account means you don’t have to worry about the costs of opening or maintaining such an account. On the other hand, some brokers may seek charges.
2. Safety: One of the biggest advantages of a free Demat account is that it ensures that your shares are held in digital format, which means they are protected from loss or damage. Holding shares in their physical form would expose them to theft, loss or damage.
3. Access: By opting for free Demat account opening, you can gain speedy and easy access to all your investments through a single account; you can access the details anywhere, on your smart device.
4. Error-free: A Demat account is error-free as it is a digital format; on the other hand, holding shares physically is error-prone.
5. Settlement: One of the advantages of a Demat account is that the settlement cycle gets lowered to a mere two working days rather than 14 days for settlement of physical shares, thereby saving time and effort.
6. Transfer: With a Demat account, the transfer of share ownership to a nominee is easy. When shares are held in their physical form, the process of transfer is time-consuming and long-drawn.
Disadvantages of Demat account
1. Tech-knowledge: You would need to be tech literate to trade in stocks via a Demat account. If you are not used to a smart device or online transactions, you may find trading a tad difficult.
2. Increased frequency: Because of dematerialisation of shares, you tend to trade in stocks more frequently. Share prices and other information is available at the click of a button, which is both a plus and a minus. You may tend to trade on a short-term basis and your long-term investment habits may take a beating. In order to overcome this, you would need to stay focused and disciplined; focus instead on the advantage of having a Demat account and look to trade calmly and patiently.
3. Annual maintenance: Opening a Demat account would mean having to pay an annual maintenance charge even if only one share is held in the account.
However, as a beginner trader, you would need to consider the many advantages that come with holding a Demat account. The advantages outweigh the demerits of Demat account. In fact, a smart trader can easily turn the perceived disadvantages into benefits by paying careful attention.
If you wish to begin your trading journey, all you would need to do is open a free Demat account. The process can be done online and is seamless and hassle-free. You would need to provide some basic information and begin trading in no time with your free Demat account.
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