Typically, when you wish to invest in stocks and equities, the first thing to do is to open a Demat account in India. This is best done with your bank or a key brokerage firm like Motilal Oswal. A Demat account is mandatory to trade in stocks and invest them, as it is an account that holds your securities. These are held in electronic form, and due to the complete digitisation process, your stocks are held in one place in a seamless manner. Most investors buy stocks and they may lie in a Demat account for a while before they can be sold to yield a profit. However, there may be some safety issues you have to address when you have a Demat account.
Purpose of a Demat Account
The main purpose of opening a Demat account is to hold your stocks in electronic format. Most often, Demat accounts are linked to trading accounts and this facilitates the easy transaction of trading and deposit of stocks. When you open any top Demat account in India, say one through Motilal Oswal, a leading brokerage, this account is connected to the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) automatically. This allows you to sell and buy mutual funds, stocks, commodities, etc, depending on your portfolio. All transactions through a Demat account take place smoothly online, and as you transact, you may see that brokerages charge you fees for transactions. However, several investors are in the habit of purchasing stocks and holding them for a period. This may be done with a view to long-term investment or for any other reason. Then, suddenly, such investors are surprised to see that their bank accounts (also linked to Demat accounts) have been debited by certain amounts of money. Consequently, after you open a free Demat account and trade and invest, you have to keep a watchful eye on what brokers are up to, related to your Demat account. You don’t want to end up with profits through your trading transactions only getting used up for paying brokers unnecessarily.
The Safety of a Demat Account
With regulations by SEBI (Securities and Exchange Board of India) in place, and the transparency of online transactions, operating a Demat account is generally a safe process. However, you often find the Nifty 50 Index and the NSE releasing warning guides to traders and investors to review their Demat accounts regularly. While leaving your funds idly sitting in your Demat account, you may just forget that they are there. Furthermore, standing instructions given to brokers must be undertaken with care. These may be interpreted incorrectly, and you may find debits. You should pick a reputed broker, one that gives you a total Demat account in India with a gamut of value-added services and extreme security. You get this with a firm like Motilal Oswal. The majority of traders and investors make the error of having a running account with brokers, and when they don’t trade or invest, funds may inadvertently be debited. It's a good idea to revoke instructions to have a running account when you don’t need it, and opt for ‘Bill to Bill’ settlement instead, if you are facing a lull in your trading and investment activity.
Be Secure
A Demat account in India is free when you open it with Motilal Oswal. Moreover, the brokerage offers you security beyond par. Yet, it's a good plan to deposit funds only as far as you need them for trading, and not too much. Furthermore, your KYC details should be regularly updated, so there is no risk of you not knowing account details.
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