Whenever you bought shares of a company some years back, that company would send you some papers related to those shares. Those papers were proof that you have invested in that company and have bought shares in that company but since the advent of the Demat Account, all have changed. So let’s know what this Demat account is and why it is so important that its full details are in detail.Only through Demat accounts, people can buy or sell shares in the stock market. You need to have PAN card to open this account. You will not be able to open a demat account without a PAN card.
What is Demat Account ?
Demat Account is used by people to buy or sell shares. Just as people keep their money in the bank account, people keep their shares in the demat account.
Whenever we withdraw money from our bank account, then they are physically present in us. But as long as it is in the bank, it is a digital currency. Whenever we make a payment anywhere from a debit card, we also use a format of Digital Money Transfer that is a form of electronic money transfer. Similarly, when we have a share in the Demat account, we can digitally transfer them to another person’s demat account. In such a situation, we do not need to keep the shares in physical form.
In other words, the facility of digitizing Digitally i.e. electronic form is called demat. Demat’s full name is “Dematerialize”. The process of changing the shares of securities ie physical form is called Dematerialization.
As I said earlier, whenever you buy a stock in the old time, the company would send you the documents related to that stock. It was proof that you have invested in the stock. But whenever you used to sell that stock, the document was first used in the company’s office. It was seen by the company that when you sold the stock, what was its value and according to that you got the money. This process was very complicated as well as wasting a lot of time. So most people would have avoided investing in stocks.
But at the present time, the world has made a lot of progress. As soon as you buy the shares, you will be in your account shortly after. And if you sell a stock, its money will be given to you shortly. Nowadays, you do not even need a computer to buy or sell shares, you can do all this from your mobile.
You need a password to access Demat accounts and you need to enter transaction password for transaction.
What is the Cost of Opening a Demat Account
If you are thinking that you have to spend a lot of money in opening a demat account then you are wrong. You can open Demat Account with a lot of ease in just 300 to 700 and start investing in shares.
To open a demat account, you have to spend only 300 rupees or more. To run a demat account, the DP takes several types of fees from you. There is a separate fee for everything. This fee can vary in different company. The fees charged in the first place are account opening fees.
After this, the fees charged for managing the account are Annual Management fees. The company takes this fee in the beginning and manages the account throughout the year and looks after it.
Custodian fees are dependent on your share number. Either the company takes it in one go or is charging month by month. The duration of taking the fee depends on the company.
Transaction fees mean that whenever a share is exchanged in two Demat accounts, the company charges a fee for it. Those fees can be according to the number of shares or according to their price.
If you are new to the market then you will be advised that you should definitely get help from a broker before investing.
Who Can open Demat Account ?
There are two institutions to open a demat account in India, the first NSDL (National Securities Depository Limited) and the second CDSL (central securities depository limited). There are more than 500 agents in these depositories who are called the depository participants. Their job is to open a account. And they are also called DP in common language.
It is not necessary that the DP is a bank. And only he can open a demat account. Apart from this, there are many institutions which can open a demat account. Some of these major institutions are india infoline etc.
You can open an account by going to their office or you can open the house Bethe Demat account online with the help of internet. The process is very simple. But keep in mind that the PAN card is mandatory to open it.
Benefits of Demat Account
There are several advantages of Demat account, but let us know some of the major benefits of Demat account:
1.After buying shares through a Demat account, the chances of theft or fraud are not equal to that because all the shares are in electronic means ie in the digital medium. It is safe because of the risk being very low.
2.It took a lot of time to transfer shares first. It also used to take months to time. But now it is not so, you can immediately transfer them with demat accounts. After a few days of sending, it appears in the account of whose Demat account it has been sent.
3.Selling shares first was very difficult to sell, you only had to sell shares in a group. Along with this, you could not sell the shares in an odd number but now it is not so. You can also buy 1 single share through Demat account.
4.Now if you open a Demat account, you can personalize the account individually. It was not the first time that used to be a certificate for the first share.
IMPORTANT QUESTION ABOUT DEMAT ACCOUNT
Q-1- Can I name my demat account to someone else ?
Ans- No, you can not name any other person’s name in your demat account, but you can give your shares to another person or transfer it to that account, but for all this, the person also has a demat account.
Q-2- How much Demat account can I put together ?
Ans- You can keep more than one Demat account just like a bank account. But you can open up to three accounts in one company.
Q-3- Which documents should be open to open a Demat account ?
Ans- You have to have a PAN card in order to open a demat account. Through this, you will be able to open your account. In addition to opening the account, you must keep this document with you.
2.Voter ID Card
Before investing shares with a Demat account, understand the market well once before investing. Only then invest. If you are new to this thing please take help from Broker Brokers sell and sell shares at your place. They have a good understanding of the market. They take a small fee from your profits and buy or sell shares by representing your account at your place.
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