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What is the significance of having DEMAT Account?

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Demat Account stands for dematerialized account. In this account, all the securities and shares which a trader holds is electronically placed.A trader has to open this account with a registered broker or discount broker.The process of conversion of shares into electronic form is known as dematerialization. Once your Demat account has been opened you will get a specific account number and a DP ID number which has to be retained by the trader for future communication.

Earlier traders possess physical copies of all the shares and securities which they hold and it was really difficult to preserve those copies. With Demat account, several traditional trading barriers have been removed. Some of the biggest advantages of Demat account are discussed below:

1)It is a time-saving approach to trading. Within a fraction of second traders can transfer, buy and sell shares using their Demat account without wasting much time.

2)In one single account all the mutual funds, equities, shares, bonds can be held. No separate account for different securities is required.Also at one place traders can check the status of different securities. They do not have to visit separate different accounts to do so.

3)Chances of losing physical certificates by some means like robbery, theft get reduced. And no more traders have to worry about the security of shares which they have in physical form earlier.

4)All orders are securely placed with the depository participant. Therefore traders do not have to visit different companies whose shares they are holding again and again.

5)Traders can trade in any number of shares even 1 by having Demat account which was not possible earlier when shares were physically held by the traders in the form of certificates.Traders can take a decision on the basis of their investment goals entirely and not have to focus on any other constraint.

6)The unnecessary cost of issuing and distributing physical copies of shares by the companies has been eliminated. Although now also if a trade wishes to have a physical copy of his shares he can. He just has to make the request for the same and pay its charge.

To begin with trading in equities, shares, bonds etc the primary step is to open Demat account. Without this, a trader can not begin with trading.With Demat account, Indian capital market has gained several benefits in last few decades and also made the entire process of trading very easy.


However, it has a disadvantage as well. As this has made the entire process online, that is the Internet is a must. Traders who lack in having knowledge about the Internet or not skilled enough to use it find it difficult to trade. But yes there are brokers who can trade on their behalf, overcoming this barrier for them by charging commission.
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