Demat account meaning
Demat account, a short form of dematerialised account, acts as an electronic safehouse to store financial securities such as mutual fund units, equity stocks, corporate bonds, government securities, and other derivatives. It also provides an opportunity to buy and sell desired financial securities. Similar to a bank account, it protects your instruments from physical damages. In the Indian financial system, you can open a demat account with any professional brokerage house through virtual platforms.
Interesting features of a demat account
Following are some important characteristics of an electronic dematerialised account:
- It deals with multiple types of securities such as stocks, bonds, short-term instruments, IPOs securities, mutual funds, and ETFs.
- Facilitates fast transfer of ownership between traders.
- Provide a smooth trading facility anywhere in the world.
- Protects securities from physical damage and theft.
- Ensure hassle-free settlement of orders.
Numerous broker firms offer low brokerage demat accounts. Along with online trading facilities, brokers render free sessions regarding trading tips. Brokers’ platforms guide how to start trading in the stock market.
Important points to know before opening a demat account
As you know, a demat account helps in holding and trading in the stock market. Once you open your account, it will keep all your traded funds and instruments automatically. Due to this factor, you need to keep some important points in mind before opening an account.
1. Fees and brokerage charges
Fees and cost structure of a demat account involve initial expenses, per trade cost, annual maintenance fees, account opening charges, and service charges. These charges differentiate brokers from each other. You should analyse charges of multiple brokers before approaching a specific service provider.
2. Additional support
Look for back-end support before opening an account. Some brokers provide additional support services to resolve customer issues. Additionally, stock recommendations, real-time trading help guidance, fundamental and technical analysis are important services that you should consider while selecting a broker.
3.Types of brokers
In India, brokers are mainly discount-based or full-service brokerage firms. Both are different due to their functions. Discount brokers provide trading facilities according to traders’ directions, but full-service brokerage firms offer additional services along with trading. Additional services involve stock recommendations, fundamental and technical analysis of stock prices. These brokers also deal in mutual funds, ETFs and other securities and provide information about how to start share trading in share market.
4. Account opening requirements
You need to have several documents to open a demat account. Every brokerage firm demands essential documents to verify your identity and financial status. The most important documents are PAN card, Aadhar card, bank account, voter card, driving license, and passport (if any), income receipts, ITR receipts, and preceding months’ bank statements. You need to keep these documents handy while opening an account.
5. Account opening procedure
If you know how to open a demat account, you can start trading without a problem. Usually stockbrokers provide a complete guide about the account opening procedures. An account opening process involves simple steps like filling an application form, uploading relevant documents, verifying documents, and activating an account. Go through their portals and learn how to open an account with them.With these simple points, you can open your demat account with the best brokerage firm.
Also read:- Basics Of A Trading Account That You Must Know