Top 5 Reasons Why Demat Account Important for Stock Investingadmin | August 16, 2022 | 0 | Featured
Trading offers investors and traders a fantastic chance to become finically independent. Trading was significantly different a few decades back. Information was difficult to come by, and trading was difficult. You wouldn’t be able to trade effectively without a broker. The previously used hearsay approach, which required you or your broker to be present at the stock exchange physically. They would communicate verbally or using hand gestures to buy and sell shares. With the development of the internet, everything has changed.
With the aid of a terminal that was directly connected to the stock market, stockbrokers could easily conduct trading. This offered greater chances for investment with the help of real-time price information. However, the shares continued to be traded and transported in physical form. As a result, there were several inconsistencies in the trading process, such as shares that were misplaced or lost in the mail. Violations, including trading without owning shares and forging shares, were also committed. The development of depositories and the Demat account sparked a revolution in trading. Demat accounts offered the security physical shares lacked. Traders and investors can keep securities in a dematerialized form using Demat accounts. Thanks to this, investors can now store securities safely without dealing with the difficulties of physical shares. Trading became efficient and convenient.
Here are the top 5 reasons why a Demat account is important for stock investing.
- Diversified Holdings
A Demat account enables you to trade in the stock market. When your purchase shares, they are credited in the Demat account and debited from the same when you sell these shares. The securities stored in a Demat account aren’t just limited to stocks. Here are a few securities that can be stored in a Demat account.
- Mutual Funds
- Government Securities
- Exchange-Traded Funds (ETFs)
The process of converting physical shares to the electronic format is extremely easy. It is known as dematerialization and can be used to store all securities.
The Demat account is like a bank safe. It can store all kinds of securities securely. It is very difficult to hack as depositories deploy state of the art security systems. Even if it is hacked, it’s even more difficult for your securities to be transferred. Compared to that, robbery of physical shares feels like childsplay. Previously traders would sell shares they didn’t own, as there was no way to identify if you were a shareholder or not quickly. Now it’s impossible to sell shares you don’t own as information about your holdings is readily available. Demat has played a crucial role in eradicating the forgery of shares. Demat account is capable of safely and reliably storing all securities.
- Easy of transfer
Demat account has made the transfer of shares quick and easy. The Postal service of India, although extremely reliable, isn’t that convenient. Due to the Demat account, the settlement period has been reduced down to 2 days from 14 days. The risk of lost or damaged shares during the delivery process has also been eliminated. Transferring ownership is done quickly as well with the help of the depository participants. The whole trading experience has been expedited because of the Demat account.
The Demat account has reduced trading charges drastically. It has successfully eliminated stamp duty, handling fees, postal charges, etc. This reduction in charges has increased the trading activities. It has encouraged a rise in traders as well as brokers can offer lower brokerage fees making the trading process cheap and convenient.
- Additional Benefits
There are many other benefits that traders and the companies listed on the stock market have had because of the Demat account. The whole trading process has been streamlined. Corporate benefits like issuing dividends and share splits are extremely beneficial for the companies. They can easily get the list of all the shareholders without much delay. Apart from this, investors and traders can trade in multiple segments from just one Demat account.
Along with this, your Demat account can be used as collateral for loans from the bank. It’s also convenient for traders to freeze their assets if they’re not planning on utilizing their Demat account. The Demat account can be unfrozen quickly to help you trade easily in the stock market.
Knowing about the Demat account can help you drastically to trade in the stock market. IIFL Securities is among the leading stockbrokers in India, and they can help in learning what is stock market? They have all the information a trader could need to make trading easy and accessible. Open a Demat quickly through their hassle-free process and start your trading journey today