Understanding the Benefits of a Demat Account

A Demat account is a repository for holding different types of securities in an electronic format, which was first introduced in 1966 in India. This paperless process of holding securities ensures security and avoids theft. The full form of a Demat account stands for a dematerialisation account. Beginners who want to gain from the stock market should open a Demat account first.

This blog elaborates on the numerous benefits of Demat account, defining the concept of using this account.

Demat Account Meaning

A Demat account allows investors to hold and store purchased securities, such as stocks, bonds, mutual funds, and ETFs, in an electronic format. This feature of a Demat account makes your portfolio management and transactions more convenient. It also helps you to trade securities seamlessly without considering the hassle of handling physical share certificates.

After opening a Demat account, investors have to make a buy or sell order through their trading account.

Understanding the Demat Account Advantages

The Demat account has streamlined the trading process by replacing physical share certificates with a digital format. An investor who opens a Demat account can enjoy numerous benefits. Below are some of the common benefits of using a Demat account:

1. Time-Saving

   Using a Demat account saves your time by ensuring a fast settlement of shares. It takes only two days to complete the settlements after the transaction date.

2. No Risk of Losses

   Ensuring safety from fraud and impersonation is one of the common advantages of opening Demat account. Demat accounts reduce the risk of theft or loss by storing all the shares electronically.

3. Ease in Tracking

   Demat accounts eliminate the need for manual record-keeping because they secure all of your holdings in a secure server. You can easily track your purchased securities through this online platform.

4. Corporate Gains

   Demat accounts automatically provide details of bonus issues, shares, and stock splits from the companies. You can receive refunds, dividends, and interest in your account at the right time.

5. Loan Facility

   You can pledge your securities in the Demat account as collateral to avail loans from banks.

6. Cost-Effective

   Unlike physical trading, demat accounts eliminate your expenses like stamp duty and handling fees and take only transparent brokerage charges.

7. Holding Numerous Securities

   Using a Demat account helps you hold numerous securities on a single platform, including stocks, mutual funds, bonds, and ETFs. You can also track the performance of multiple securities in your Demat account.

Final Thoughts

Opening a Demat account is necessary to trade and hold securities in an electronic format. Zero risk of losses, loan facility, corporate gains, ease in tracking, and the ability to hold numerous securities are some of the benefits of Demat account.

Download the application of PL Capital Group – Prabhudas Lilladher to open a Demat account for free! PL does not charge any fees for opening a trading account, and you can avail a wide array of services from broking to portfolio management.

Frequently Asked Questions

1. What are the tax benefits associated with a Demat account?

Demat accounts help you hold debentures and bonds with different tax benefits. You do not have to pay taxes if you earn interest from government bonds and securities.

2. Do you need a Demat account for stock market investments?

Yes, you need a Demat account to invest in the stock market. It helps you to hold the securities in a digital format.

3. How does a Demat account keep my investments secure?

Dematerialisation or a Demat account keeps your investments safe from fraud and loss by storing them in an electronic format, which is also easy to manage.

4. How can a Demat account be a cost-effective option?

Unlike physical holding of shares, a Demat account reduces the additional costs of stamp duty and handling fees. Since it operates digitally, it only charges brokerage fees from investors.