With demat accounts on the rise, and more and more enthusiastic investors swarming the markets, the demand for stock investment is bound to rise as the days go by. Investors are savvy these days, employing different strategies to invest and trade in the markets, and willing to take risks to take a chance on high returns. Since 2019, the market regulator, SEBI (Securities and Exchange Board of India) has mandated that all physical shares held be transformed into electronic forms. In other words, material (physical) shares have to turn into dematerial form (electronic) to facilitate security and better storage and maintenance of stock holding by investors.
Although it had been regulated by SEBI to convert your physical shares, as held in paper share certificate form, to electronic form, in other words to get them dematerialized, many folks still hold shares in paper form. Dematerialization is essentially the process of converting your physical shares into electronic formats, so they are held in an online account, a demat account. Furthermore, if you are a novice trader and want to explore investment in the stock markets today, you have to open a demat account linked to a trading account.
It isn’t at all surprising that dematerialization has come into our lives in a big way. With advancements in technology and almost every function of life available online, stock trading and investing was bound to go online too. The digital age demands that individuals take advantage of the facilities provided by technology and hold their securities safely in online digital formats. The mandates on dematerialization, based on SEBI’s 2019 ruling, state that an individual may hold shares in paper form, but in case the shareholder wishes to conduct transactions, that is, sell/buy shares, this will not be possible until those paper certificates are dematerialized. Today, there are many ways to invest in stocks, and you can also apply for any upcoming IPO. Hence, it makes perfect sense to go in for dematerialization.
Now that you know that you must open a demat account to trade your shares, and have the flexibility to do this at any time you choose, you will no doubt wish to know how to go about converting your physical shares. While the process is relatively simple, there are some aspects of dematerialization to consider:
Once you have successfully started a demat account, which should not take you much time, online or offline, you can begin to take steps to transform your physical paper shares into electronic format, held safely in your demat account. Here are some important points to note in the steps for conversion of your physical shares:
If you wish to convert your shares into demat format, there are some costs that will have to be borne by shareholders. Typically, the conversion of each physical share certificate to an electronic format can cost around Rs. 150 - Rs. 500 for each share certificate. The costs involved with holding demat accounts are essentially levied for annual maintenance of the accounts. The range of the cost may vary, depending on individual banks and brokerages. Moreover, if your demat account is linked to a trading account, which invariably it must be if you want to buy more shares or sell your newly transformed shares, each time you trade or undertake transactions (purchase or sale of stocks), you will have to pay a fee to your bank or broker. These transaction costs/charges also vary, based on your distinctive bank or brokerage.
Whether you open a demat account to invest in the ever-flourishing stock markets, or wish to invest in an upcoming IPO of a company you see future growth potential in, you need to view things in a clever way. Nowadays, everything is going digital, and in order to make the most of the convenience and security that digitized services assure, you should convert any physical shares you have into demat formats. You may be late in the day if you haven’t already done this, but it's better late than never at all. In case you want any monetary gains out of your investment, dematerialization is the only answer.
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