You must be familiar with bank savings accounts. It provides easy access to our funds and offers security against theft and mishandling. The Demat account also acts like a repository. However, it stores financial securities. The Demat account is essential for investing in the stock market today. The Demat Account is an account to store shares and securities in a digital format. A dematerialised account is the complete form of the Demat account.
The purpose of opening a Demat account is to hold shares that have been bought or dematerialised and converted from physical into electronic shares. This makes it easy for users to trade in online markets. To explore various advantages gained when you open demat account, follow the article below.
What is a Demat Account?
A Demat or dematerialised account provides the facility for holding shares and securities electronically. For easy user trade, shares are purchased and stored in a Demat account during online trading. A Demat account is where all investments an individual makes in traded shares, government securities, exchange-traded funds, bonds, and mutual funds are stored.
Demat has helped India’s stock market digitisation process and ensured better governance by SEBI. Moreover, by storing securities electronically, the Demat account reduced the risk of storage, theft, damage, and liability. It was first introduced by the National Securities Exchange (NSE) in 1996. The opening of an account was initially carried out manually, which took investors several days to bring it online. You can open a Demat account with an online brokerage like IIFL Securities in five minutes. Demat has become increasingly popular due to the end-to-end digital process, and its use has increased significantly.
Benefits of Demat Account
The various advantages of an online demat account are as follows.
1. Faster settlements
Before dematerialisation, due to the physical transfer of paper shares, the trade settlement took 14 days. However, the settlement period with a Demat account has been shortened from 14 to 1working day to save investors time, effort, and energy.
2. Security and safety
The safety and security offered by the Demat account are the most important advantages. There was always a risk of loss or theft of share certificates when the financial assets were physically present. In the event of loss or theft, an investor must go through a lot of paperwork and practical difficulties to gain access to these assets. And there’s no guarantee of recovery in that case. Thus, you should always go for a Demat app download after thoroughly verifying its authenticity.
3. Single storage for all assets
A Demat account doesn’t only store shares. It also holds all your financial assets, such as debentures, bonds, exchange-traded funds, unit-linked insurance policies, etc. The fact that all assets are available under one roof is a significant advantage of the Demat account. This makes it easy to manage and monitor them. It’s also helpful when you file your taxes because all your records are stored in one place.
4. Liquidity and monetisation
Apart from the ease of transfer, Demat accounts also make it easier to sell assets. If you hold these financial assets in a dematerialised form, you can quickly liquidate them. You may sell or borrow funds against shares, mutual funds, etc. If assets are held in tangible form, it is impossible to liquidate and monetise them quickly.
5. Easy Transmission
Dematerialisation makes it possible to quickly transfer ownership of assets in a Demat account to the next of kin in an unfortunate case where one of its holders dies. It can be done by opening a joint Demat account or adding the next of kin to the Demat account as a beneficiary. This could not have been achieved when the shares were kept in physical form. There was a great deal of effort to be made by legal heirs about their claims on the financial assets of the Demat account holder after his death. The key advantage of Demat accounts is the ease with which assets can be transferred.
Conclusion
There are several advantages to using an online Demat account. It protects your assets from loss or damage, enables easier transactions, allows faster settlements, provides access to credit, and prevents Demat Account fraud and forgeries. In India, given the advantages of Demat accounts, they have almost completely replaced paper-based trade. You should conduct thorough research on the risks associated with the stock market. Moreover, always open an online Demat account with a trusted brokerage firm if you wish to invest in the stock market.
