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Demat Account for Stock Trading – Axis Direct
AxisDirect-O-Nomics
Mar 01, 2018 | Source: AxisDirect
Importance of Demat Account For Trading
The advancement of technology is positively affecting all sectors of India, and the Indian stock market is no different. Since the start of paperless buying and selling of stocks, and financial instruments, as well as the availability of live stock market charts online, the share market has witnessed increased investments in the stock markets.
Investors continue to remain bullish about the Indian stock market growth as the leading financial pundit’s view the long-term outlook for this emerging economy to be appealing. While picking the right company share is the key to success in the stock’s investment, every investor needs to get their basics right to begin their trading journey.
Demat account is Vital
The Demat account is a primary requisite for all investors yearning to trade in stocks to begin money gains in the Indian stock market. These days without a depository or Demat account investing in equities in the Indian stock market is no longer possible as most of the commodities futures and spot market is shifting towards paperless trading. Even the existing shares that the investor may hold in paper form can be dematerialised and kept in electronic form under a Demat account.
Opening a Demat account
A Demat account varies from a trading account that is needed for buying and selling of shares. A Demat, also known as dematerialised account holds shares and securities of the investor electronically via a depository participant, who then becomes a mediator between the depository and the investor.
Most financial institutions, banks or the stocks trading brokerage companies will open a Demat account for the investor. However, for online stock trading, it is recommended to begin a Demat account and trading account with the same broker or financial institution.
Advantage of a Demat account
With a Demat account, stocks now take a digital form, eliminating the trouble of investors holding physical bundles of share certificates and its associated risks, i.e., damage of paper certificates, theft, fake share, duplication, signature mismatches, transfer hurdles and much more.
Under the depository account system, all the ownership and transfer of shares and securities occurs electronically, as there is no stamp duty needed for the transfer of shares. And once the stock is credited to your Demat account its comes directly under your name without the need of involving any registrar. This further prevents investors from the chance of loss of certificates that can happen when papers have back and forth movements from the registrar office.
Demat challenges
The challenge with Demat account comes when the investor does not use the account. It is then necessary for them to close the account as otherwise yearly maintenance charges are payable. Another risk is of fraudulent use of the account when it is unattended and becomes dormant. However, the account can be shut only if there are no shares in it.
Selecting a Demat account provide
While most investor only views brokerage charges as an essential aspect of choosing a provider, it is recommended to also look at the technological efficiency of the platform. That is whether it showcases investors preferred stocks, events, prices, financial data, history, current portfolio value and the cost of the portfolio and most vital the live stock market updates, thus enabling investors to make sound trading decisions.
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