How Is A Demat Account Helpful?

The trading scenario in India has undergone tremendous changes over the years. It is no longer limited to the physical maintenance of share certificates. Before 1996, physical paperwork was a significant part of buying and selling shares. But it posed many limitations like a lengthy procedure, risk of loss, inconvenience, etc. To eliminate these issues, the concept of dematerialisation was introduced in the Indian markets in 1996, ending the need for physical share trading.

Today, you can manage your shareholding from anywhere, thanks to online trading platforms and Demat accounts. A Demat account is like a bank account, except it maintains your shares instead of money. In addition to shares, a Demat Account also helps you hold financial instruments like Mutual Funds, Equities, Bonds, Exchange-Traded Funds, Government Securities, etc. Let us understand the uses of a Demat Account in detail:

Entry to Stock Market

You should open Demat and Trading Account if you wish to invest in the share market. At the same time, the Demat Account stores your securities, and the Trading Account allows you to conduct transactions. Linking them equips you to commence your trading journey. Investing directly may seem complex and intimating to beginners. But dematerialisation provides total control and helps you manage your portfolio with ease.

Saves time & cost

Trading physical securities led to costs like handling expenses, stamp duty, etc. These charges impact your investment returns. Moreover, determining them beforehand is impossible. Fortunately, a Demat Account eliminates these charges as you only pay the brokerage. You can also calculate your brokerage using a brokerage calculator.

Besides cost, time is also an essential factor influencing efficiency. It takes time to transact with physical certificates. Dematerialisation eliminates this hassle as transactions take place instantly.

Opportunity to invest in IPOs

Investing in Initial Public Offerings is an excellent method to make money in the stock market. But it does carry some level of risk as companies list their shares publicly for the first time. However, adequate research on their performance and management is the key to choosing lucrative IPO options. If you find good IPOs, investing early lets you benefit from the stock’s appreciation. An online Demat Account lets you apply for IPO with ease.

You can also block the amount for subscribing to an IPO issue with the Application Supported by Blocked Amount Facility. Under ASBA, you block the application money in your Bank Account. The money gets debited from your account when your IPO application is selected for allotment.

Trade in odd lots

Trading with share certificates requires you to quantify making large transactions. But it is not always possible to buy and sell multiple shares. Sometimes, you find single units appealing. Hence, dealing with odd lots is imperative. Thankfully, you need not worry about making single security deposits when you open a Demat account online. It enables convenient maintenance of odd lots.

Easy receipt of dividends

Your returns from trading securities differ based on the asset you choose. As for equities, you receive benefits for acquiring company ownership as dividend payments. Earlier, companies used physical records of shareholders. As a result, errors in the record-keeping affected dividend distribution. Also, as dividends were sent through cheques, there were chances of loss or theft. Dematerialisation eliminates these issues and lets you receive dividends hassle-free.

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