Most Indians have bank accounts and know the benefits that these bring in terms of saving and investment. While Indians believe in possessing at least one kind of bank account, either a savings account or a current one, many don’t see the benefits of holding a Demat account. More than 80% of Indians hold bank accounts, but Demat accounts fall much shorter compared to this statistic. This is not really surprising given the fact that most Indians have limited knowledge and may often ask themselves, “What is a Demat account?”. The main advantage of holding a Demat account is that it facilitates your trading activity, but there’s more to know about Demat accounts.
It's important to note that a Demat account is vital and mandatory if you wish to become a trader. Gradually, Indians are seeing the benefits that trading can yield as a form of investment, for short-term gains and long-term returns. Holding stocks and other traded assets are also good for the diversification of any financial portfolio, and offer investors a perfect alternative to traditional forms of investments such as fixed deposits. Coming back to what a Demat account is, it is essentially an account that stores any securities you may have in electronic form. Instead of physically held certificates of bonds, shares, etc, the dematerialisation (‘Demat’) of these facilitates secure and convenient storage.
You can easily have a bank account that is linked to a Demat account. India has a plethora of banks that offer Demat account opening and online Demat account use free of charge to their clients. Most banks have a Demat account department as well as the facility of a trading portal. In case you wish to open a Demat account, you can do so at your bank, any other bank , or at a broking firm. It's important to have a Demat account if you are an investor in India, wishing to make the most of the securities market. You can have an online Demat account linked to your bank account and these are the kinds of securities a Demat account may hold:
- Stocks or shares
- IPOs or Initial Public Offerings
- Bonds of the Indian government
- Mutual Funds
- NCDs or non-convertible debentures
The importance of Demat account use arises out of the fact that it is mandatory if you want to trade and invest. Along with a bank account, you can use funds to buy shares, debentures, etc, and these are stored in your Demat account. You can sell shares, etc, held in your Demat account and profits earned are deposited into your bank account conveniently. Typically, Demat accounts are linked to trading accounts as trading accounts allow you to buy/sell shares or any other securities (they permit you to transact). Information on Demat account usage can be sourced from any bank, your own bank or a good broker. You should be aware that your Demat account holds your securities safely, allows the ease of operation for trading and investing online, saves on certain duties like stamp duties, among the obvious benefits of facilitating investments flexibly.
A Demat account can be opened with a proficient broker like Motilal Oswal. You can also open a linked trading account and connect these to your bank account to have a convenient and versatile trading experience, earning profit as you go!
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