A demat account is a prerequisite to start your investment journey in India. It’s compulsory to have a demat account to invest in shares, bonds, mutual funds, etc., in India. If you are a demat account holder, you shall know some basic things about demat accounts. Here are the 5 things that every Indian demat account holder must know.
What is a depository?
A depository is an entity that holds financial securities like shares, debentures, bonds, mutual fund units, and government securities in an electronic format. The shares or mutual fund units you view in the demat account are held with the depository. They communicate with their clients through depository participants (DP) called stock brokers.
A depository ensures that your assets are held securely with them and provides liquidity. The depository also maintains the ownership records of your holdings and investments and facilitates trading in such securities.
India’s two big depository institutions are registered with SEBI. One is National Securities Depository Limited (NSDL), and another is Central Depository Services Limited (CDSL).
What are the demat account charges?
The demat account charges vary for different depository participants. The majority of Depository Participants waive the account opening fees. The AMC is a recurring fee charged every year.
Apart from this, dematerialization charges and off-market transfer charges are associated with demat. Dematerialization charges are charges for converting physical shares into electronic format. Off-market transfer charges are levied when you transfer shares from one demat to another.
Knowledge about trading platform
Majority of people in India open free demat account to invest in stocks and mutual funds. So when you open the demat account, you do have to check on the trading platform provided by the stockbroker. You require a good trading platform with updated features to place orders, perform research, conduct analysis, etc.
If you take an interest in futures and intraday, the trading platform should have advanced features. In today’s technology world, everyone uses an application for everything. Check if your broker’s trading platform provides app features. Online investing has become easy.
Is your demat account safe?
A demat account and a bank account are very similar. Just like your money remains secured and safe in banks. Similarly, a depository is responsible for keeping your investments secure in the demat account.
In this new age, everything is digital. You shall not share your credentials with anyone. And change your password at regular intervals.
How does a demat account work?
After you open the demat account, you can now start online investing in financial instruments through the demat account. You can start trading and investing in stocks by placing an order through a trading account. The stock exchange will process this order. You can buy other financial instruments through demat and trading accounts.
Conclusion
If you are a demat account holder, this article imparts you with good knowledge about demat accounts. After reading this article, you must have gained knowledge about depository, trading platforms, demat account charges, the safety of demat accounts, and how the demat account works.
