The demat accounts were introduced into the Indian stock market in 1996 and they changed the way people participated in trading activities. Demat trading means trading online through digital certificates of various securities. It not only eliminates the risks of theft and damages that physical share certificates are exposed to but also helps the investors to buy and sell securities in real-time.
A demat account is used to hold the securities in electronic format. It is linked to an online trading account through which you can execute the buy and sell transactions. Also, it is linked with your bank account so that you can transfer the funds required to buy the shares online. However, these are not the only benefits of holding a demat account. The other secret benefits of holding a demat account are listed below:
1. Dematerialisation of securities
With the help of a demat account, you can dematerialize your securities easily. It holds the dematerialized shares in digital form and ensures their safety. You can also convert the dematerialized shares into physical share certificates whenever you need them in the future.
2. Quick settlements
There is no denying the fact that the trade settlements have become much faster because of the demat account. Before the introduction of demat accounts, a single transaction would take up to 14 days to process as it involved transfer of paper certificates from sellers to buyers via an RTA.
Nowadays, the buy and sell transactions need only T+2 days to complete. As a result, you don’t have to take a lot of effort to monitor your transactions.
3. Elimination of errors
As trading was done with the help of physical certificates, it was prone to manual errors and miscalculations. However, as everything is managed with properly programmed software in a demat account, these manual errors were eliminated automatically.
4. Better liquidity
The available securities could be sold via a demat account whenever you need funds. Also, you can obtain a loan against these securities from banks and other financial institutions. The best part is that you will continue receiving dividends and other monetary benefits of holding the securities even when you have pledged them as collateral for availing of the loan amount.
5. Storing multiple financial assets
Many people think that a demat account only holds shares of different companies. However, you can also hold mutual funds, bonds, government securities, and many other financial assets in a demat account.
6. Easy transfer of holdings
Shares can be transferred smoothly from one demat account to another. Also, the shares will be transferred with minimum paperwork and hassle. In case the account holder dies, the holdings could be handed over to the nominee. For that, you must appoint a nominee while filling out the application form. The nominee will be in charge of your demat account holdings after you.
If demat accounts didn’t exist, the transfer of holdings would have taken a lot of paperwork and time.
7. Technological assistance
A demat account is backed by technological tools that help you analyze whether buying a particular stock is good or not. You can analyze the fundamentals of a particular stock and track its movement in real-time. You can also set trigger points to buy and sell a particular share at a specific price point. It enables you to avoid a loss or book a huge profit in case there is a drastic change in the stock price.
A demat account provides ways to download account statements, track profit and loss, and view charts of all the listed stocks as well. Therefore, managing an investment portfolio becomes much easier with the help of a demat account.
Read also:- Investing Strategies Require More Than Just A Demat Account
