What are the Pros & Cons of having multiple Demat Accounts | Motilal Oswal

Pros & Cons of having multiple Demat Accounts

If you wish to invest in a stock market, one of the first and most important things you will need is a Demat account and trading account. A Demat account allows you to store your shares in Dematerialized form (the process of Dematerialisation is explained below), and a trading account will enable you to interface with the stock market to buy and sell shares. 

In today’s market, there are a wide variety of brokers available, meaning you have the opportunity to open more than one Demat account while you are trading. However, are there any benefits to multiple Demat accounts? Let’s take a look. 

Why a Demat account is important 

  • What is a Demat account?

 A Demat account is a wallet of sorts to store your Dematerialized shares, which are in digital form. 

The process of Dematerialisation, therefore,  is the conversion of physical share certificates into electronic format. Prior to 1996, shares were held in the form of physical certificates, and Demat accounts and the process of Dematerialisation was introduced in order to eradicate issues arising from physical share certificates. 

Benefits of multiple Demat accounts 

1. An organized portfolio 

With multiple Demat accounts, you can organize your investments with different brokers to keep things streamlined. Long term investments, for instance, can go to a Demat account with a full-service broker, while short and mid-term investments can be done through a discount broker.

2. Access to more information 

With multiple Demat accounts, you can have access to the research etc done by each broker, which you can pool together to further your investments. 

3. IPOs

Though you might apply for an IPO of a company, it is not guaranteed that you will get it. With multiple Demat accounts, the chances increase, as you can apply multiple times. 

Cons of Multiple Demat accounts 

1. Higher cost

WIth more Demat accounts come more account maintenance and transaction charges, which means your overall cost will be higher and will have to be accounted for while you are setting your strategy. 

2. More time and effort is required 

In order to manage multiple Demat accounts, you will have to spend a lot more time and effort keeping track of each account and its operation,  which might not be possible for individuals who do not have that much time to dedicate to investing. 

3. Cost of Inactivity 

With multiple accounts, not only do you have to keep track of the activities on the accounts, but you also have to ensure that the accounts have routine transactions so that the DP does not freeze your account after a period of extended idling. There is also the potential for your inactive Demat Accounts to be used by scammers and hackers, so you should ensure that you are regularly monitoring all your account 

Conclusion 

Having multiple Demat accounts can prove beneficial, though they come with additional costs that you have to account for. While there are no downsides to multiple Demat accounts, it could be a lot more efficient to work with just one if you do not require multiple. Before you open a Demat account, consider the aforementioned pros and cons in order to ensure you make the most efficient use of your Demat accounts once the Demat account opening procedure has been completed, which can now be done online within a couple of minutes!

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account | Upcoming IPO | LIC IPO

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