Opening a demat account is mandatory if you want to trade in stocks or other securities. A demat account is a place where you can hold all your securities and you will also need it to participate in buying, selling, and transferring shares.
Since all the shares are held in electronic form in a demat account, you don’t have to maintain their physical copies or certificates.
Moreover, you can easily convert these shares into physical whenever you need them and similarly, the physical shares can be converted into electronic form seamlessly with this account.
Is opening a demat account important?
If you want to invest and trade in shares and other securities like debentures, ETFs, equities, bonds, derivatives, etc. then you will require a demat account.
Without a demat account, you can still invest in mutual funds and some other financial instruments but if you already own a demat account then you can use it to hold mutual funds in it.
However, you won’t need this account if you are interested in futures, options, and currency trading as a trading account would be enough for investing in these securities.
Also, you don’t have to fill a separate form for opening a trading account as it would be provided with your demat account itself by most stockbrokers. Trading account is also important because it links your demat account to your bank account and therefore, it plays a vital role while selling and buying shares.
Let us now see how to open demat account:
- Approach a depository partner who is registered with NSDL or CDSL as you will need the assistance of a DP for opening a demat account.
- You will have to submit a few documents and complete KYC online after that because the DP will check whether you qualify as per the eligibility criteria or not.
- Now, you will have to fill an online form and submit your proof of identity and address along with a passport size photograph and a cancelled cheque.
- After verification of your documents and processing your application, you will get your demat account number.
- It is a simple and fast process especially as the depository partners have started using digital platforms to complete KYC, document verification, and related processes online. Also, you can start trading as soon as you open a demat account with the assistance of DP or broker.
- Depository partners or DPs offer a wide range of Demat and oversee services different procedures that you have to follow to trade conveniently in the stock market.
For example, a slight delay can make a big difference if you trade in derivatives or equities. To avoid wastage of time, some brokers handle both demat and trading accounts seamlessly by offering a two-in-one demat/trading account.
- Some brokers even provide a mobile app that enables you to invest, trade, and track your investments in real-time.
Having a modern trading platform is also important because it will provide you with all the essential details related to stock prices, securities, and transactions that will help you to trade accurately and smartly.
Also, choose a broker who charges a minimum brokerage fee and provides a subscription based model, with minimum account maintenance charges, transaction charges, brokerage, etc. This will enable you to maximize your profits while trading through a tech-based trading platform.