Any first-time investor who has the surplus funds and wishes to be secured can make profits. But the main question is where to invest, a lot of people who do not wish to take the risks can go for investment in fixed deposits, insurance, and mutual funds. An account where an investor can hold their shares and securities in electronic form can be called a Demat account. It is important for an investor to completely understand how to open Demat account and how to use it, before beginning the process of investing through Demat accounts. It is mandatory to have Demat account if an individual decides to apply for shares in the Initial public offering and they may have to apply in the Demat form only.
No buying or selling can be possible without a Demat Account. To open Demat account, an investor must sign on the agreement papers which will include the power to the broker. Different financial institutions may have different requirements of documents for Demat account opening.
Some of the things to keep in mind while opening a Demat account are-
It is essential for an individual to understand the working of these accounts before they decide to open Demat account and how it works before going forward with it. An individual will need to open an account with a depository participant or broker. The market is filled with brokers and DP’s, so the investor will need to first understand their requirements and conduct the research accordingly.
Nothing comes free, the depository participant may charge an investor for maintaining their account. It is known as annual maintenance charges. Some brokers do not charge these as they wish to attract more customers. Though, every broker may charge the trading fee. When an investor gets to know how to open Demat account they will also learn about the different charges associated with it.
Share trading is an electronic form of investment. You need to link your bank account your trading and Demat Account as the returns or profits an investor makes after selling of the shares also reflect directly to the bank account. It is advised that investors open a separate bank account which should be maintained with a minimum amount only for trading. Investors will need to understand the Demat account meaning before getting into investing.
An investor who has begun the process of investing through Demat accounts after understanding the Demat account meaning, an investor will have to use the shares which should be transferred to the person they have nominated it to, thus an investor should make a thoughtful decision on the nominee.
The storage of data through electronic mediums of investments is done through Demat accounts. They are electronically connected through the internet, phone or other mediums. A login and password should be created by the investor and it must be kept private and not shared.
Ritesh Mahajan is a financial expert with over 5 years of experience in the investment banking industry. His passion for writing and immense knowledge drives him to educate people on various investment topics. In this article, he has given information on Demat account opening & documents for Demat account. He has written about 5 things an investor should keep in mind before opening a Demat account.