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Want to Open a Demat Account? Here's What You Should Know

Date: Sep 21, 2022 | Time: 10:18:00 AM | Author: Editor News

Joining the global market has taken a new turn with the advent of the internet, and so do the procedures in stock marketing. When you had ventured into the vast world of stock marketing, you have to take into consideration varrious things. Demat accounts or dematerialised account is one among them. It is often regarded as a prerequisite for the trading of equity delivery. A person interested to invest in stock markets cannot move forward if he does not have these accounts.

Before delving deep into the things that have to be taken care of before opening a Demat account, let us try to know why are these Demat accounts crucial.

Here in these accounts, you could avail the details within the electronic format, which is free of any cumbersome paperwork. It could be referred to as a versatile option for investors, as it is easily accessible, safe and is a record of all your transactions. Unlike normal bank accounts, in Demat accounts, you will get to see the entries related to the stocks and securities. The electronic format of these accounts is a boon for eliminating TDS deduction, besides helping to avert risks from loss, theft or manipulation.

Under the Demat account, your investments in exchange-traded funds, shares and mutual funds could be tracked effortlessly. Stamp tax will not be applied for transferring financial securities. Furthermore, in the case of the death of an account holder, its transmission and nomination can be done without any hindrances. Also, when applying for IPO (initial public offering), a Demataccount will be essential since the shares that are allotted have to be credited to the very same account.

Listed below are the crucial things to be considered before opening a Demat account.

Choosing the right brokerage firm: This is the foremost thing to be looked upon, as the further proceedings of your stock trading will be done through these brokerage firms. The features that you should consider are the services such as their services, overall benefits, customer review, legacy and others. Furthermore, you may cross-check the services offered by the brokerage and your requirements. Ultimately, you could finalise with the ones that satisfy the maximum number of your requirements. You also need to skim through the reviews or others who had thought of this firm.

Seamless user interface: Such an interface will ensure a better user experience for the investor. Risk factors associated with your account could be avoided, such as double payments. Further, it would also facilitate the auto collection of all purchase records and other payments. Since the investor is supposed to spend some time in the interface, an ideal brokerage is obliged to offer the best seamlessness of the system concerned with it.

Prefer the brokerages that are free of hidden charges: Even though you are opting for a zero balance account of a DP, you must ensure that they are not charging anything extra. It is suggested so, as a majority of brokerage do claim that not a penny is charged as an extra amount. However, in reality, they could charge if it is not a Zero balance Demat account. A responsible investor should take into consideration of such factors.

The online presence of brokerages also matters: This point is in continuation with the first one mentioned here. However, before setting out to search for the reviews of the firm, you may merely go through their website and the online services of the brand. They too have started to make their website presentable and services impressive. Apart from it, to ease the process of opening a Demat account, all of their procedures are made available online.

Types of Broking firms

Though the criteria covered above are related to brokerage selection, we will now discuss the many types of brokerage companies.

Discount brokers and service brokers are the types of broking firms you should know about. Firstly, it is as per the range of products and services provided to the investors that they are differentiated. If endless options for mutual funds, insurances, and IPOs are offered by a service broker, the discount broker would only provide equity and derivatives besides performing the trading instructions of the investor. Furthermore, service brokers constitute a considerable number of broking firms. For this, they could charge you higher fees for the services that they are providing such as Stock advice and Research Reports. So, if you are new to the stock market and trading, you will be suggested to avail of the services of service brokers, as the other is meant for expert traders since they would be experienced in researching and analysing things.

Ways to Open Demat Account

Investors have to possess and submit the basic identity and address proofs once deciding a depository participant (DP), with whom you will be registering your account. Within a few working days, you could open your Demat account, once your documents are verified by the DP. For opening a Demat account, a majority of brokers do have completely digital procedures, making you open and later transact shares from any location. After which, you can make easy transactions of your stocks. Other than a Demat account, you should also think of opening a trading account, as with its absence you will not be able to do the trading.

How crucial are Depository Participants for investors?

The Demataccount that you are opening will be registered with your Depository Participant. It could either be an NBFC or a bank. Moreover, they will again be registered and monitored by either NSDL (National Securities Depository Limited) or CSDL (Central Depository Services). An investor could trade in National Stock Exchange and Bombay Stock Exchange if they possess both a Demat account and a trading account. With DP, all those unnecessary paperwork could be eliminated, as here the tacking of assets could be done digitally. Because of this very reason, the procedures related to storing assets and trading them later have become simpler than in the earlier days. Even then, the management of their massive affairs with numerous investors is not yet affected drastically, since everything is done online.

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