In the earlier period, when the trading process was done in the paper format, the crowd and effort to bid for shares were really painful. The trade with different traders was done through physical certificates, which exposed traders to scams or theft issues. The selling of share certificates and preserving them in a folder was also a lengthy process.
However, due to the arrival of the Internet and Demat accounts, stock trading is as simple as buying products from an e-commerce website. All you have to do is click and sell your shares instantly. You buy the shares using an online method through a broker portal. As you buy a share, it will transfer from your trading account to your Demat account. These shares can be available for trade in the stock market.
A stock market is a common place to trade in equities, Futures and Options (F&O), commodities, Initial Public Offerings (IPOs), mutual funds, and more. You can sell all your financial assets from anywhere you want.
Read on to learn how to trade in a Demat account and what the prerequisites are for opening a Demat account.
Table of Contents
Importance of a Demat account
Just like you need a bank account to store your savings and process online banking transactions, you need to have a Demat account that will secure and transfer all your financial assets in electronic format.
The word ‘Demat’ stands for ‘dematerialisation’. Through a Demat account, traders can access trading from smartphones or desktops. Holding a Demat account can solve tonnes of problems, including security issues and the management of investments in your financial portfolio. For multiple reasons, a Demat account is an essential part of trading in the stock market. There is no rule for holding Demat accounts. You can keep your Demat account empty or trade with any number of securities.
How to Operate a Demat Account?
With the introduction of online trading, you can log in with your ID and password on a broker platform. A depository participant (DP) who will act as a depository agent has to be selected before opening a Demat account. You can open a Demat account from Share India free of cost. It is important to check the DP charges and the opening charges for Demat accounts. With Share India, you get low trading fees and more leverage of information and insights about the stock market. To open a Demat account, you need to enter your details and then submit your Aadhaar card, PAN card, and photographs. You need to perform an eKYC and then wait for the approval of your Demat account. You also need to read and tick on the agreed fields of the terms and conditions of your trading account.
How to Trade with a Demat account?
Let’s look at the steps for trading in a Demat account. To do this, we need to open two accounts, which are the trading and Demat accounts. After opening the accounts, you need to follow the steps mentioned below:
- First, download your stockbroker’s app or log onto your stockbroker’s website.
- After successful login, check the market assets such as stocks, index funds, mutual funds, etc.
- Suppose you want to invest in a stock of ABC company after having researched the company.
- To buy this ABC company stock, add the required funds from your bank account to the stock trading platform. After that, add the number of shares of the company, check your required amount, and place an order to buy the shares.
- After placing the order during trading hours, check if the delivery of shares on your Demat account was successful or not.
Through an online Demat account, you can have multiple opportunities to trade and sell your holdings in just a few seconds.
Some of the Technical Terms Related to the Demat Account
Stock Splits
Stock splits refer to splitting one stock into two or more according to the company. This depends upon the ratio of stock split provided by the stock company.
Bond
The government offers bonds to invest in, which come with less frequent growth but with a riskier investment.
Corporate Benefits
A Corporate Benefit refers to any advantage, whether financial, commercial, trading, or related to reputation, that the company, its holding company, subsidiaries, subsidiaries of its holding company, related companies, subsidiaries of related companies, trading partners, counterparts, or members may gain, excluding benefits solely for its officers. These are immediately added to your Demat account online.
Nomination
Nomination is a procedure through which a Demat account holder expresses their choice regarding the recipient of these securities in the event of their death. The nomination process for a demat account can be completed when opening the account or at any subsequent time.
Benefits of Trading with a Demat Account
Here are some benefits of having a Demat account:
- A Demat account provides hassle-free trading with fewer trading charges.
- You can get access to your trade from anywhere in the world. Trading from your home, office, or even while travelling, is possible through your broker portal.
- Faster trade settlements. Unlike before, when settlement took weeks, now it only takes T+2 days to settle your trade.
- You can trade at a low cost. Trading online with Demat often eliminates paper charges, stamp duty charges, and more.
- You can take loans with your Demat account holdings as collateral.
Conclusion
A Demat account offers lots of benefits and is the most convenient way to trade in the money market. Once you know how to trade in a Demat account, as a beginner or an intermediate investor, you are good to go. Now, participating in any trade is not as hard as it was in the previous era. So, as a smart individual, you can make your investment work in a better way.
