Benefits & Importance of Dematerialization
Dematerialization refers to the transition of tangible paper-based stocks to digital bookkeeping. Since 1996, the dematerialized form of securities has been a proven effort to deter fraudsters from making forgeries.
With the benefits like safety, convenience, and cost-efficiency, the dematerialization of financial securities is the only way to tackle the increasing demands in the investing world in this era of technological advancements.
An investor needs to create a demat account to take advantage of dematerialized securities. Demat full form is dematerialization.
Importance of Dematerialisation
1. Quick transfer
Digitized securities can be transferred quickly from one demat to another demat account. In the stock market, prices fluctuate every second, and millions of trades take place in seconds constantly. Dematerialized securities minimize the time taken to complete a trade that enables investors to make the most out of fluctuations.
2. Security of Funds
The dematerialized form ensures that securities are safe and secured in online storage called demat account. Being digital, the risk of losing securities, forgery, delay, the damage is entirely deterred. As a result, it is the rarest of a rare case that any investor will find any discrepancies in the value or volume of traded securities.
3. Cost-effective Process
Dematerialized securities have eliminated paperwork for stock trading that makes the transfer process more cost-effective. The paperless transfer does not include stamp duties that save on investing costs.
Benefits of Dematerialisation through Demat Account
Every investor needs to create a demat account to invest in the stock market as a demat account allows to hold dematerialized securities. An investor will get the following benefits with a Demat account:
1. Unlimited transfers of unlimited securities
When there was an outcry system in the stock market, investors had to follow a number of rules and regulations to transfer even a few securities. But now, a digital demat account allows investors to transfer unlimited securities in one go at the comfort of home.
2. Different types of Securities at one place
An online demat account allows investors to hold different types of securities in one place. You can store stocks, derivatives, commodities, currencies, and all other types of financial instruments in the stock market. Hold your shares, mutual fund units, government bonds, exchange-traded funds all at the same place. It makes it easy to review all the holdings in a single account.
3.Automatic credit of non-cash benefits
Non-cash benefits like bonus shares, stock splits, consideration, mergers, etc., get automatically credited in your demat account.
4. Alert of every debit or credit
Alerts are sent through SMS and email for all debits and credits in your demat account. It keeps you updated and your demat account safe.
5. Rematerialization Facility
Another benefit is closely related to dematerialization – rematerialization. It refers to the transformation of digital stocks back to the paper form. However, it is a rarely used service and occurs much less frequently in the stock market.
6. Flexible Account
Demat account is flexible enough when it comes to trading. You can use any smart handheld device to log in to your demat account, whether it is a smartphone or tablet, or laptop.
7. A solution to the odd-lot issue
Demat account allows trading even a single share which was not possible during the outcry system in the stock market.
8. Online Procedure
You can open your demat account following 100% online procedure from form to documents to signature. First, choose a registered broker and submit the online application form along with scanned copies of required documents and passport size photographs. Next, the broker will verify your PAN details and other documents. Finally, after a successful in-person verification process, you will get your demat account log-in credentials.
This way, dematerialisation benefits making the investing process convenient and faster.
Also Read:- What Should We Do For Successful Long-Term Investment?
