A Demat account, otherwise also known as a Dematerialised account, is the most important piece of the trading puzzle. Think of the Demat account as the home for all your shares and other securities. Thanks to this very Demat account, the necessity of holding and trading physical share certificates has become null and void.
An open Demat account is necessary to step foot into the trading world. To add to a Demat account’s importance, apart from the red carpet it spreads for potential traders to welcome them, it also has some merits that everyone must know.
10 Lesser-Known Advantages of a Demat Account
A Demat account embodies, what one might call ‘main character energy’ amongst the various provisions that let traders start their journey. Here are some of the hidden merits this account possesses.
1. Safe and Secure
- Having shares under a Demat account is safer and more secure as the chances of any theft are NIL.
- When assets were held in physical form, the risk of loss or theft of share certificates always existed.
- If such a loss or theft happened the paperwork and operational challenges involved in recovering them would be extensive and recovery too wasn’t guaranteed.
- In the digital Demat form, chances of theft or loss of assets are negligible.
2. Seamless Settlement Process
- Settling a trade before a Demat account took 14 days
- There was a lot of physical movement of share certificates and passing between hands involved.
- With the Demat account, however, trades can easily be settled in merely 2 working days
3. Less Error Margin
Since physical trade settlements involved manual work the margin for error was always higher
Because of Demat accounts now, however, such errors in trades have significantly reduced.
4. Easy Transmission
- In the event of a Demat account holder’s death, the ownership of the assets held in the account can easily be transferred to the next of kin.
- By opening a joint Demat account or by adding the kin as a nominee in the Demat account this can easily be achieved.
- In the case of physical shares, the legal heirs had to run around a lot to claim rights to the assets.
5. Increased Liquidity
- A Demat account helps liquidate assets easily
- Liquidation of an asset can either mean selling it or taking a loan against it.
- Such an easy liquidation process is not available when it comes to an asset’s physical form.
6. Provision to Hold Physical Assets in Digital Form
- The Government of India has issued Sovereign Gold Bonds
- With this, investors can invest in gold and possibly get an additional return of 2.5%.
- Such a provision is not available when holding gold as an asset in physical form.
7. No More Selling in Lots
- When physical shares were being traded, they were sold in lots
- Now, with the Demat account to help, even single shares can be traded easily.
8. All Assets Under One Roof
- Demat accounts aren’t just for storing shares but for other financial assets too
- These can include debentures, bonds, ETFs, etc.
- With everything under one roof, tracking and maintaining each asset become easier
- Filing taxes also becomes easier, with all financial records in one place.
9. Easier Accounting
- In the Demat account, every transaction is accounted for, automatically, by your depository participant or DP.
- This makes any and every account process extremely manageable even for young traders
10. Updating Information from One Place
- During the physical shares trading phase, any updation in contact details or nominees had to be conveyed to several companies.
- A Demat account however lets you easily update any of your information by simply giving a heads-up to your DP about updating the KYC records
In Conclusion
The Demat account is a wonder to behold, especially when a trader knows how to handle it and access the slightly lesser-known features it has to offer. With the help of an open Demat account, traders take their first steps into the trading world. Even if there are Demat account charges that a trader has to bear, the many added advantages of the account, without a doubt, help traders continue their journey with ease and experience.
