Want to invest in the stock market but not sure where to start? A Demat account is an answer. It is easy to set up a Demat account and acts as a stock account that allows you to purchase, hold and sell shares of companies listed on the exchange. This article looks at everything you need to know about Demat accounts and how they work.
Demat account is a term used by investors to refer to their trading account for share markets. You can use a Demat account to buy and sell shares of companies listed on stock markets. A Demat account is also known as a depository account or a dematerialized account.
You can open one at any time, and it is completely free of charge from your brokerage or mutual fund company. You will need to give them your name, address, contact information, and some documentation about your identity.
Once you have a Demat Account set up, you can transfer ownership of your securities from the company where they were originally purchased (known as the issuer) over to your new Demat account. You will be able to keep track of everything in one place, and it is much easier than keeping physical documents with you.
How to Open a Demat Account?
Opening a Demat account is a simple process. All you need to do is open a demat account with a depository participant (DP). Once you open your Demat account, you can buy or sell stocks and mutual funds through them.
You can open an online Demat account by filling out the form on our website. You will then need to add details about yourself and your bank account. After this, you will receive an email from us confirming that your request has been placed successfully. This email will contain all the details highlighting our products and services and how you can use them.
Demat Account Details You Should Know
Here are the different aspects of Demat accounts you should know.
- Demat Account Number
It is a 16-character beneficiary ID issued under CDSL (Central Depository Services Ltd.)
- DP ID
Every depository participant (DP) has an ID, which is part of the Demat account number.
- POA Number
It is a part of the Power of Attorney agreement, which allows the stock broker to operate an investor’s account based on requisite permission.
How is a Trading Account Different from a Demat Account?
Most stock brokers usually provide a trading account when you open a Demat account. You may get confused and think both are the same. However, that’s not the case. A trading account is essential for buying and selling shares in the stock market. Meanwhile, a Demat account includes all the details of shares and securities you purchase.
Most stock brokers offer a trading account with online trading capabilities. It allows you to buy and sell shares right from the comfort of your home.
The different types of Demat Accounts
There are mainly three types of Demat Accounts
- Regular Demat Account
This type of Demat account is used by Indian investors to buy and sell shares, mutual funds, and bonds. A regular Demat account can be opened at any time in India by a resident Indian.
- Repatriable Demat Account
NRIs use this Demat account to repatriate investments back to their country of residence. It is possible to open this account only at a designated depository participant in India. You also need to link it to an NRE bank account.
- Non-repatriable Demat Account
As the name implies, assets held in this type of account remain non-repatriable in any manner whatsoever. You cannot transfer funds abroad from this account. It is also necessary to link this account with an NRO bank account.
For investors who want to trade in Indian shares, a Demat account is a requirement. A Demat account is essentially an electronic version of the investor’s stock trading account and typically features lower transaction fees and the convenience of separate sub-accounts for each security. It is easy to open a Demat account at Choice India, which you can do online from the comfort of your home.