What is a Demat Account?
Demat or the dematerialised account is essential for Indian individuals to trade in listed stocks or debentures. According to the Securities Exchange Board of India (SEBI) guidelines one is required to maintain a Demat account where shares and securities are held in electronic form. It is opened by the investor while registering with an investment broker (or sub broker). In short it is a simpler and hassle free way of trading online.
Advantages of Demat account
It is a safe and convenient way to hold securities. Not only does the account enable immediate transfer of securities one also does not need to pay any stamp duty on transfer. Since it holds securities online it also eliminates the risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc. Moreover it cuts down the paperwork involved in transfer of securities as well as brings down the transaction costs. Additionally, wile using the account one does not face the problem of odd lots as you can sell even a single share. The account also provides the facility of nomination.
A account holder has shares automatically credited to the account in the event of a bonus/ split/ consolidation/ merger etc. additionally, one can hold investments in equity and debt instruments in a single account.
Why I need a Demat Account
Nowadays, practically all trades have to be settled in dematerialised form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, traders no longer wish to hold physical shares. Hence, a demat account is a must for trading and investing.