5 Factors to Keep in Mind Before Opening a Demat Account

Investing in stocks has given good returns to many. Earlier, this investment opportunity was restricted to a select few. Due to the physical nature of the execution of transactions, stock market participants had to rely on brokers or jobbers for any trade.  Also, there were certain apprehensions in people’s minds related to stock market trading activities. The mindset changed drastically when the Indian stock exchanges moved to the electronic format and introduced online Demat account.

📜 What were the drawbacks of physical shares?

The trading aspect of the stock market got digitized, and so has the mode for storing the assets bought on the Stock Exchanges. Gone are the days when physical shares were exchanged between the buyer and the seller. The physical shares had their own set of drawbacks, listed as follows:

1. The process of transferring the name was tedious and time-consuming.
2. Physical shares were prone to be misplaced or damaged.
3. Securely storing the share certificates was a big concern.

📱 The emergence of online investing and trading

The inconvenience was gone with the advent of the dematerialization of shares. With the emergence of online broking platform, investors participated in the markets without an intermediary. With the technology to store shares electronically, life became easier for the Investor. Online investing has opened up a world of opportunities to the new age of investors and traders. The only requirement now was to open Demat account, and you could easily hold and transact on the securities of your choice.

So let us look at the 5 things to keep in mind before opening Demat account.

1. Understanding the need

A dematerialized account is like a safe, which holds all your financial securities. All transactions in financial securities that you buy and sell are routed through your Demat account. So whether your financial assets include shares of a listed company, mutual funds, ETFs, bonds, IPOs allotted, government securities, etc., you need to have a Dematerialized account to store your assets.

2. Depository

In India, Demat accounts are held by GOI depository organisations – NSDL and CDSL. There are further several Depository Participants (DP), such as Stockbrokers, R&T agents, NBFCs, who work as intermediaries between the Depository Organisations and the Investor.

3. Documents required

You must have the following list of documents to open a Demat account:

• PAN Card – Submitting a copy of your PAN Card is mandatory.
  
• Proof of identity – Aadhaar card is the most preferred document submitted here.
  
• Proof of address – A Passport or Driving License is generally used for this purpose.
  
• Photographs / Online photo upload
  
• Bank account details

4. Fees and charges

These charges and pricing may vary from one DP to another. It is vital to check the past track record of the DP and the charges before proceeding.

• Account opening fees: Many DPs nowadays offer a zero charge account opening.
  
• Annual maintenance charges: The DPs charge yearly fees to keep your account operational. However, nowadays few online brokers offer zero AMC and platform fees.

5. Account opening procedure

There are options to open the account either online or offline. Depending upon your preference, you can choose whatever is more convenient to you. First, selecting the ideal Depository Participant best suited for all your needs is advisable. Then you need to submit all the relevant documents and contact details. Once the documents have been successfully verified, the account is opened. Then all details associated with the Demat account are shared with the user by the DP.

Parting thoughts

So whether you are an Investor or Trader, it is essential to open your Demat account. It is the first step in your journey to explore the financial markets in India. Opening a Demat account with a trusted stock broker brings ease, convenience, security, and speed to the trades carried out by you.

Here are some investment lessons for new comers in the stock market and list of Nifty 50 stocks in India that you can study and begin your investment journey.

Happy Investing 😇

Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.