4 reasons to opt for a Demat account for online trading

The physical stock market had been operating for a long time in the Indian economy. In this system, people directly bought stocks and sold them by exchanging paper certificates. Shares were actual documents that needed to be mailed and shared and records had to be kept for every transaction. Therefore, around the country, hundreds of paper trails would take place which would make the whole stock market very cumbersome as well as prone to frauds.

The government of India started to promote the digitization of the stock market and to make it much more efficient, introduced Dematerializing Accounts in 1996. Demat Accounts, in short, are online accounts assigned to the traders where stocks of the different companies can be stored. All the transactions are recorded in electronic online ledgers and kept secure.

The Demat Accounts give users a good place to start investing in the share markets or in other sectors. Other than that, there are many more advantages of Demat Account. A Demat Account provides a secure platform for storing assets online. It helps investors to trade conveniently. 

4 major advantages of Demat Account have been discussed below to enlighten the investors of its usage.

Lower Costs

When starting on a trading platform different forms have to be filled, claims have to be made. With physical documents these need to be sent from place to place via postage. This requires separate charges previously unaccountable for. Also, procedural charges applied by the company are difficult to track by the trader. 

In such a case, the Demat Account helps an individual set up a new account and clearly see the fees involved in the process. In fact, in most cases while setting up a new account, only a small brokerage fee has to be paid, nothing else is required. Therefore, the cost barrier of entry is very low in online Demat accounts. This is one of the major advantages of Demat Account.

Faster Trading

Faster execution of orders is necessary for fast trading in the markets. In the case of physical documents, the clients would file petitions to buy or sell stocks in return a confirmation certificate would be generated completing the transaction. All these would take a few days at least. 

Being online is the best advantage of Demat Accounts. The whole market and all the stocks are in the Depositories. Therefore, buy and sell stock requests can now be immediately processed. Powerful servers are maintained by the government that holds records of every transaction taking place in the depository to avoid mismanagement.

Lower Risks

With the advent of Demat Accounts in the share markets, the whole concept of trading has been made a lot more secure for the general public. Here are some of the different aspects of trading made safer with Demat Accounts.

Collateral for Loan

Demat Accounts hold all user stocks and mutual funds in a single place. These are sometimes of significant value. Therefore, these can be used by their owners to get loans from banks.

Documents are not perishable

Physical records of every transaction mean certificates with paper and ink signifying the ownership of a particular share. This can be difficult to maintain for a long time because such certificates can damage easily. Instead in the online Demat Account ownership is digitized and stored for a long time.

Stack of Documents are avoided when trading through Demat accounts

No loss of documents

When documents travel places there is always a chance of them getting lost. This not only causes loss of money to both the buyer and the seller but also wastes a lot of time which might be useful for better purposes. Of the many advantages of Demat Account, the data recording part of the account makes it a robust process.

Scams and forgery reduced

Scammers in the physical market era would sell stocks at high prices for companies that would not even exist in the depositories. Another popular scam was carrying out transactions in stock by forging the owner’s signature. Both these processes have been reduced to nearly zero after the shift to online Demat Accounts was made. These advantages of Demat Account have made trading highly secure.

Also, all the companies on the Depository domain need to be properly registered including the depositor participants. This makes the presence of scam institutions in the market very low.

Odd Lots

With physical certificates, buying and selling were possible only in the specified quantities. There was also a limit to the number of shares traded physically at once. This stopped users from making big profits in the market. Also, the convenience of dealing with odd lots or single security was not available. Demat Accounts eliminate this issue as now users can set out a buy or sell command of any quantity of shares they choose and get instant returns.  

All these advantages of Demat Account show how beneficial the shift towards online accounts has been. Users can now trade freely, with more security in a fair market, and get returns on their investments swiftly. There are numerous advantages of Demat Account, which make the investment process easy and hassle-free for the normal investor.