Over the last few decades, the stock market segment has progressed to great heights, allowing investors the opportunity to invest small amounts and get good returns. In keeping with this progress, the stock market segment is now progressing to a digital platform, allowing potential investors to easily access their shares and equity, with a quick turnaround, and even updated news regarding the market deals.
As a first step into stock market trading and transactions, there will be a requirement to first open a demat account. It functions similarly to a bank passbook. Using this account, you can easily purchase or sell shares of different stocks, which can only be done through the account. When you make a purchase or sell, the stock is converted from a paper form into an electronic form, known as dematerialization. The reversion of the process is known as rematerialization.
How to open a demat account
In order to open a demat account you must follow these steps:
• You must first approach a depository participant ( DP ). The function of the DP is to act as the intermediary between the investor and the depository.Ensure it is registered with the National Securities Depository Ltd. (NSDL) andthe Central Depository Services Ltd. (CSDL).
• The manager from the DP will provide you with an application form that will need to be filled and deposited back to them. You will need to provide certain mandatory documents, such as identity and address proof. You will also need to provide an original PAN card during the process of account opening.
• Once the documentation is processed, your DP will provide you with a unique account number, also known as the demat account number. You will also be provided with a unique log in ID as well as password. This allows you to access the account anytime you need to make a transaction.
Once this process is done, the DP who also functions as a stock broking firm, bank or even a sub – broker will demand a minimum cheque in your name. This is a normal protocol which allows you to begin purchasing shares. In this case, the DP will purchase dematerialized shares in your name and save them into your account. You will also be charged a minimum broking charge for this transaction.
What are the advantages of trading through a Demat account?
Through the demat account, you will have access to:
• High security in transactions
• Timely delivery of shares
• Reduction in the probability of fraudulent transactions
• Trading in huge volumes
• The cost per transaction is comparatively lower to physical trading, due to the reduction of the costs associated with paper usage or stamp duty.
• Mobility and ease of working from any location
• Investing in IPO’s, ETF’s of gold