Why do I need a Demat Account for trading in the stock market? – a question that pops up in the minds of every investor who steps into the stock trading industry. Well, one has to know what is Demat Account what is the use of it to comprehend its importance in the trading process. Some traders come up with the argument that the only purpose of Demat Accounts is converting physical shares into the electronic form. But the increasing diversification and development of the latest technologies have made people believe otherwise. There is so much that an investor can do using his Demat Account.
But before doing anything, one has to know what is Demat Account what is the use of it. Choosing the right Depository Participant is the first and most crucial task in this aspect. Yes, because the NSDL and the CDSL are the prime and major depositories in India who have hundreds of Participants working as the connecting bridge between them and their customers. Traders who are well-versed with the Demat Account uses are in a place to utilise their resources to the most.
Uses of Demat Account In The Share Market
The ones who know about what is Demat Account what is the use of it will always enjoy an upper hand in the market. There is no comparison of well-informed investors as their efficiency is far greater than what we can utilize.
Conversion of Shareholding Certificates
There are several conversion activities that the investors can perform after knowing what is Demat Account what is the use of it. They are –
- Dematerialisation – conversion of stock trading certificates, including bonds, shares, government securities, ETFs (Exchange Traded Funds), IPOs (Initial Public Offerings), etc.
- Rematerialisation – conversion of all the Demat form certificates into their physical formation.
- Destatementisation – The conversion of mutual fund units into the electronic format.
- Restatementisation – The reconversion of mutual fund units into their physical or original form.
- Redemption – Transfer of mutual funds to the fund owner.
Online Transfer of Share Documents
There is no need for a courier, speed posts or any other form of postal services to transfer the share certificates to buyers, friends or family. With the online services of the Depository Participant, the investors can pull off this action easily using their Demat Accounts. Thus, one does not only get the convenience and seamless experience of online services but also saves additional costs of availing postal services.
Loan Collateral
Investors knowing what is Demat Account what is the use of it can also use their account statements as loan collateral. Yes, the statements are eligible for personal loans, and one can pledge them to the bank owners for the same. This service allows investors to enjoy the benefit lower interest rates than the usual. Investors can also expand their range of investments and build new strategies for future investments.
Electronic Storage of Mutual Fund Units
Mutual funds units can also get a storage space in the Demat Accounts of investors. So, the ones with a vivid range of investments and a few in this arena can take advantage of this service by opening a Demat Account. This facility will also allow them to have a quick view of all its investments on a single dashboard.
Reflection of Trading Transactions
When an investor purchase shares using the trading account, his Demat Account will be credited, and when he sells his shareholdings using the same, his Demat Account will be debited. Thus, the Demat Account shows the reflection of the trading transactions that an investor incurs in the stock exchanges. One can also reflect at his other transitions that involve the transfer of certificates on the online medium.
Account Freezing Option
Not every trader has the zeal or time to stay busy and active in the stock market throughout the year. Most of the investors take time off the market to hold their share certificates for a long period. Depository Participants allow these investors to freeze their accounts and keep their balance as it is for a predefined time.
Access To Speed-e-facility
The speed-e-facility involves a range of online services that the NSDL and the CDSL offer to the Demat Account holders. These facilities are best for active investors to complete most of their trade commitments online.
Trading Portfolio Service
Demat Account holders can also get their trading portfolio if they end up choosing the Depository Participant who offers this service. So, one should always check the availability of services beforehand.
Investors learn what is Demat Account what is the use of it and then start their stock trading industry. With the increasing number of Depository Participants in the industry, it has become more beneficial for the account holders as the market competition induces them to offer more benefits. Since every DP is doing its best to provide the maximum advantages to the traders, the Demat Accounts help them enhance their investment strategies too!
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