Holding documents in digitized form has become more popular than ever before. The reason for that is very simple. Documents stored in digital form are more secure and easily accessible.
Just as digital wallets like Google Pay, Paytm helps you transact money digitally without the need to carry physical cash, similarly, a Demat & Trading Account helps you transact in shares digitally.
A Demat Account holds all the shares you’ve purchased or dematerialized (including stocks, bonds, mutual funds, Exchange Traded Funds etc.) in electronic form. It’s mandatory to have a Demat and Trading account, if you wish to trade in the stock market.
Now, if you are a new investor, you may find the technicalities a little difficult to understand because you haven’t operated a Demat Account before or may not have bought shares previously using a Demat Account.
So how do you go about it? Let’s take a look.
Opening, managing, and using a Demat Account is straightforward.
At first, you need to select a Depository Participant (DP) to open a Demat Account. After that, you need to fill out the account opening form along with submission of the identity proof, address proof, PAN card, and a photograph. Once you upload the documents and select the brokerage plan, an in-person verification gets initiated. Once the application is submitted successfully and verification is done, client ID and password is generated. You can use it to login to your Demat & Trading account online.
You need to note that other than a Demat Account, you would also require a Trading Account to perform the buying and selling of the shares. Once you place order to buy, a request is sent to the stock exchange. Once the order matches with another investor who placed a sell request at a similar price, the order gets executed. It takes T+2 days for the credit or debit of shares in a Demat Account after the execution of trade and the confirmation from the exchange. (T is the day of trade).
Following are some of the important terms associated with a Demat Account.
To sum up, we can conveniently say that with the advent of the Demat Account, trading has become more accessible and swifter. Additionally, a Demat Account addresses the safety concern by safely storing the securities in an electronic form. Besides, you cannot trade in the share market if you don’t have a Demat & Trading Account. All said and done, you need to identify your requirements and objectives and select the right service provider accordingly.
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