Home/Blogs/What are the Disadvantages of Having a Demat Account

What are the Disadvantages of Having a Demat Account

stock market
18 Aug 20216 mins readBy MOFSL

Before dematerialization came about, shares of a company were stored in physical form. Shareholders often found this a challenge as certificates would get misplaced and the like. There was also the off chance they would get stolen. Fortunately, dematerialization of shares came around and these risks have been eliminated, as shares are now held in an electronic form in demat accounts. Nonetheless, there’s another side to the demat story and people claim that there are some disadvantages of demat account holding. You should be aware of these while you open a demat account.

Disadvantages of Dematerialization

The lives of investors have been significantly simplified with demat accounts and linked to a broking account, demat accounts can facilitate the purchase and sale of securities easily. Nowadays, every aspect of the financial world and its processes is done by electronic means, and this offers convenience and speed. However, there are certain disadvantages of dematerialization you should know about, and these are listed below. 

1. Annual Charges 

The first thing to consider while opening a demat account is the annual maintenance fees/charges that most banks charge. However many securities you hold in a demat account, whether it's one or many, you will undoubtedly have to pay a fee on an annual basis for maintenance costs. This charge is different from bank to bank, or wherever the demat account is being held. Nonetheless, you may come across some banks and finance companies that offer a free demat account for life.

2. Technology Savvy 

If you know about stocks and securities today, you will realize that trading has become completely electronic. In order to trade, evaluate the share market, access your demat account, etc, you need to go online and have knowledge about basic computer operations that facilitate you to manage your portfolio. People who are not familiar with computer operations find it extremely difficult to operate a demat account online. Herein lies one of the huge demerits of demat account holding. Most seniors who hold shares find operating a demat account online an uphill task. If you aren’t tech-savvy, you may miss out on opportunities to trade and make consequent profits. 

3. Share Trading at High Frequencies

With the dematerialization of shares, trading operations in the market have become faster and simply done with a click online. This compels shareholders/investors to track shares easily online, which may seem like an advantage. However, it also forces the habit of short-term trading, making you miss out on fruitful long-run investment opportunities. You may trade more often than not, leading to losses more than rich long-standing gains. 

4. Stockbroker Supervision

Various stockbrokers are enabled with the power to run operations in the stock market. As an investor with a demat account, you have to be on top of things to continuously supervise your stockbroker’s actions. You may need to check if there are any incorrect transactions in your demat account from time to time. Being on edge about such issues is definitely one of the disadvantages of demat account holding. 

To Round Up

A demat account brings many credits to the table, but is also a source of a few disadvantages. You can see the demerits of holding one and compare merits as you check out Finserv MARKETS where you can get more information. 

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

 

Popular Stocks:  HDFC Bank share price | ICICI Bank Share Price | UPL Share Price | Tata Consumer Share Price | Divislab Share Price

Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C