Learn the Advantages and Disadvantages of Multiple Demat Accounts

Traders participate in the stock market through the share market. Today, it’s possible to open more than one Demat account to trade in the share market. The benefits of multiple Demat accounts can be arguable for each individual. Online Demat accounts allow the trader to have complete access to their account and buy or sell assets with a potential gain in the stock market. A Demat account gives you a secure location to hold all your financial holdings. So, as a trader, you need to have a Demat and trading account along with the Internet to trade online without going anywhere.

If a person wants to open multiple Demat accounts under their name, then it’s important to know the pros and cons of multiple Demat accounts before opening more than one Demat account. You can operate multiple Demat accounts from different broker firms.

Investors can have multiple reasons for opening more than one Demat account. While there are several benefits to having multiple Demat accounts, there are also some drawbacks that cannot be ignored if you seriously want to have multiple Demat accounts. In this article, we will discuss the pros and cons of having multiple Demat accounts.

Opening Multiple Demat Accounts in India

It’s not a huge task to open multiple Demat accounts in India. But the major thing is to understand the purpose of these multiple Demat accounts. Just like you open multiple bank accounts to fulfil different financial needs, you can open multiple Demat accounts, too. A person can have as many Demat accounts as they want.

Because your Demat account is linked to a single PAN card, managing multiple Demat accounts will be simple. Your PAN card is the identification, and it’s unique for each individual. Therefore, as long as your PAN card is correctly connected with your Demat accounts, all your financial holdings will be tracked and managed properly. Therefore one PAN card can be used to open multiple Demat accounts.

Advantages of Multiple Demat Accounts

• Having more than one Demat account lets you trade in different assets with a better view of your trade. You can have a different Demat account for different assets, such as one Demat for mutual funds, one for Future and Options (F&O), and the other one for delivery trade.
• Each stockbroker has some pros and cons. Trading with multiple brokerage houses can let you trade with different insights and news related to the stock market. Brokerage houses also provide you with different charts and stock analyses, which enhance your knowledge and help you to trade in the stock market.
• Increase the investing opportunities with multiple Demat accounts. Suppose you want to invest in Initial Public Offerings (IPOs). For that, you can use any one of your Demat accounts to invest only in upcoming IPOs. You can use multiple Demat accounts to segregate each investment properly and increase your investment capability.

Disadvantages of Multiple Demat Accounts

• One of the biggest drawbacks of opening multiple Demat accounts will be the Annual Maintenance Charges (AMC) for each Demat account. Most brokers offer one year of free AMC and then charge a minimal fee. This fee is minimal for a single Demat account, but owning multiple Demat accounts can result in higher AMC.
• The second drawback of multiple Demat accounts is the time and attention required for each Demat account. If you are not a professional or a full-time trader, then handling more than one Demat account will not be your cup of tea.
• Each Demat account has different credentials. You need to remember your password and transaction personal identification number (TPIN) for trading in the stock market.
• If you do not perform any trades in these Demat accounts, chances are that your idle Demat accounts can get frozen. Then, you have to go through the whole process of unfreezing your Demat account. The entire process will waste your time and energy. So, to avoid this situation, you need to be active in each of your Demat accounts.

Conclusion

Multiple Demat accounts have their advantages as well as disadvantages. Depending upon your investment strategies, risk appetite, and time for investing, you can open a single or multiple Demat accounts. A trader who wants to invest on a weekly or monthly basis should go for a single Demat account.

Frequently Asked Questions (FAQs)