What Should New Investors Understand About Demat Accounts?

 What Should New Investors Understand About Demat Accounts?


The only requirement for someone who wants to buy shares or invest in securities is that they have a Demat & Trading Account. Having a Demat & Trading Account is all that is required to trade or invest in shares, making it the only requirement for doing so. To trade on the Bombay Stock Exchange and the National Stock Exchange, a person must have a Demat & Trading Account. Using the same account, a person can trade on the Multi-Commodity Exchange if they want to trade in commodities. 

A Demat account is a digital storage system for your stocks. Stocks, mutual funds, bonds, exchange-traded funds, etc., can all be kept in a Demat account. Unlike the previous system, it stores your stocks digitally, representing them with paper certificates.

You need a Depository Participant to open a Demat account to sell and buy stocks on the Indian stock market. Organizations called depositories hold your securities electronically and make transactions easier. Central Depository Services Limited (CDSL) and National Securities Depository Limited (NSDL) are the two depositories registered with SEBI. Depository Participants (DP) serve as intermediaries between investors and depositories. You must use a DP if you want to use a depository’s services. The account you must have with a DP is known as a Demat account. 

A trading and demat account may be opened at brokerage firms. Most of these providers also let you access these accounts via a web or mobile app, allowing you to trade on the go and from any location. With any brokerage firm, you can open a Demat account by providing essential documents like a PAN card, an Aadhar card, and other KYC documents. Once all required documents have been submitted, a Demat account will be opened in a few working days. Some brokers also offer a completely digital method of opening a Demat account. 

According to depository participants, different fees apply to opening a Demat account. Although most DPS charge an account opening fee, however some private banks do not. In addition to account opening fees, there may be other costs, such as annual maintenance fees (AMC), credit fees, statement mailing fees, etc. AMCs for Demat accounts range from 200 to 850 rupees. The number of transactions can affect how much AMC is charged.

You can link your trading and banking accounts to your Demat account. Each time you submit a “buy” or “sell” request, your DP sends it to the stock exchange, which matches your request with a buyer or seller and helps facilitate the trade. Your Demat account is then appropriately debited or credited based on the transaction.

To benefit from investing in the India share market, you must have a Demat account. Make sure you know all the features offered and the fees different depository participants charge before opening one. A Basic Services Demat Account will do for a novice investor. 

Opening a Demat account has become more accessible through the stock investment app. Such apps help you open a free demat account and charge zero brokerage fees, no Demat account fees, and much more free-of-cost services. Thanks to the software developers for introducing investment apps to encourage stock market investments among ordinary people. 


Paul Petersen