Demat Account was Introduced in India in the year of 1996, there was a time when shares and securities were physically issued and traded. Buying and selling shares meant placing an order with the broker over a phone or by sending a request to the post. There was always a risk of fraud, forgery, or impersonation. In India, all these scenarios have changed after the introduction of the online Demat Account in the Market. In this article, we will discuss the benefits of Demat Account.
The importance of opening a Demat account is it allows the investors to hold their securities electronically in their Demat account. It makes the entire process of investing, holding, monitoring, and trading very fast, easy, convenient, and cost-efficient. Here are the 7 benefits of opening a Demat Account :
Top 7 Benefits of Demat Account
There are various investment options available in India. You may choose to bank deposit, corporate bond, property, mutual fund, physical gold, real estate certificate of deposit, and many more. There are a few drawbacks to these investments. For example, in bank deposits, corporate bonds, and mutual funds, investors get low returns rate, sometimes less than the inflation rate. Also physical gold and real estate have liquidity issues. So the stock market has an investment option, where you may get good returns and liquidity.
Most investors prefer to invest in the stock market. For investment/trading you must have a demat account. With help of the Demat account, you can invest or trade-in various market segments such as day trading, delivery, Index, and more. There are other benefits of a demat account apart from trading in the stock market.
Loan Against Security :
A Demat account Holder can take advantage of a loan against the securities held in their Demat account. The investment and securities which is held in your Demat account can give you access to an assortment of credits from those banks that provides loans against security. Investors can use the securities as a guarantee to make sure about credit from the bank.
Odd Lots :
Buying and selling with physical certificates were only possible in a specific quantity. The importance of dealing with odd lots or single security was not available but the Demat account eliminated this issue. An odd is mainly an order amount for the security that is less than the normal unit of trading for that particular asset, which is typically 100 shares for stocks. On a percentage basis trading commissions for odd loans are generally higher than those for standard lots. Therefore most brokerage companies have a fixed minimum commission level for such transactions.
Liquidity of shares :
In Demat Account getting money after selling shares is much more convenient, simpler, and fastest. The investment should be liquid so that investors can access their capital whenever required. Stock liquidity is the ability (ease) to buy or sell stocks without affecting the price. This means a stock that trades enough shares for the trader to sell it at any point in time is a liquid stock. These benefits are not possible without a demat account.
Freezing Demat Account :
Demat Account holders have the power to freeze the particular type or quantity of securities in a Demat account.
They also have the right to choose to freeze their Demat account for some specific period of time. By freezing, it will stop the transfer of money from any Credit or Debit cards into a specific Demat account.
Receiving stock Dividends and Benefits :
With a quick and easy method to receive dividends, interest, and refunds, Demat eliminated the time-consuming method. It is automatically credited to the account. When it comes to updating investors’ accounts with stock splits, public issue, bonus issue, rights, etc, electronic clearing services (ECS) it is also extremely convenient.
With a Demat account, you can not just invest in stocks but also in Equity linked Savings Schemes (ELSS), Unit-linked Insurance Plans (ULIPs), commodities, futures & Options (F&O). With the help of a Demat account, you can compare and track the performance of all your investment on a Single Screen.
Easy share Transfers :
User can transfer their share with no time with the help of a demat account. Having a demat account makes the whole process much more convenient and faster.
Transferring the securities from one Demat account to another Demat account can be done through delivery instruction slip (DIS) or receipt instruction slip (RIS).
Both the slips allow the users to fill in all the required and necessary details for carrying out the transaction in a smooth manner.
Conclusion of benefits of Demat Account
In the conclusion, it defines the several benefits of a Demat account as a loan against security, odd loans, liquidity of shares, faster settlements, receiving stock dividends and benefits, a single account holds the multiple instruments, Easy-share transfer. With these benefits of the Demat account, they have almost replaced the paper-based Trading in India. If you want to invest in equities, it is important that you go through the research into the risk related to equities and only open a Demat account with a trusted or reputed broker. To open demat account now you can visit our website kundkundtc.