Open Demat Account

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Ever seen famous investors like Warren Buffet,
Ramesh Damani, Mohnish Pabrai, and Rakesh
Jhunjhunwala making huge gains from the Stock
Market? How do they do it? What are the reasons
behind their success? Well, the answers to all
these questions can be simply understood from
ones own experience and learning. Stock Market
is a place where one needs to gain practical
experience no matter how much theoretical
knowledge one possess. Having Knowledge is
extremely essential and advisable. But gaining
practical experience and learning from ones own
experience is equally important. To get started
with Stock Market, it is essential to open a
Demat Market. In this article we will spend some
quality time in understanding the Demat Account
and its associated intricacies.
Lets understand what exactly a Demat Account in
laymans language is. It is similar to a Savings
Account in the Bank. However, in this Account one
can hold or transfer shares or stocks. It is a
digital form of account. Demat Account is a short
form for Dematerialized Account. The Process of
Dematerialization can be understood as the method
of converting or representing physical shares and
securities in the digital format. With the help
of Demat Account, one can trade in the Stock
Market smoothly and conveniently. Investors
generally face a dilemma of how to choose the
best Demat Account . A Demat Account offered by
any Brokerage firm should always be chosen based
on the parameters such as the ease of opening of
the Demat Account, Software and User Interface
provided by the Brokerage firm, Trading Cost and
Brokerage, Minimal Annual Maintenance Charges
etc. The process to Open Demat Account is usually
very simple. You have to fill out a Demat Account
opening form online, then enter the required
personal contact details, upload the necessary
documents and fill out some of the essential
details. Once the e-verification part is done,
the Demat Account is ready for clients to start
trading and investing.
There are multiple benefits of the Demat Account
that makes it quite popular. Demat Account saves
a lot of time for traders. Within split second,
the shares can transferred, bought or sold. Demat
Account allows you to hold different securities
such as mutual funds, equities, shares, bonds in
one single basket. This provides flexibility and
convenience to traders. Also, with Demat account,
all orders and shares are secured at one place
and traders need not to worry about the security
of the shares which earlier was the case with the
physical form of shares. There are some concepts
and processes related to Demat Account that an
investor should always have certain idea of. Some
pertinent Terminologies of the Demat Account are
Depository, Depository Participant,
Rematerialization, Freezing and Defreezing and
Closure of the Demat account. To understand these
concepts, let us take an example. There is a
place X where the electronic securities are held,
it is known as Depository. Here the online buying
and selling of securities is facilitated and an
extensive record of holdings is maintained. There
is an investor Y. And there is an entity Z called
Depository Participant who is the authorized body
that acts as the link between the X and Y. Z
provides the facility of Demat Account to the
investors. In simple terms, the Brokerage houses
acts as the Depository Participants.
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X
Y
Z
Depositor
Investor
Depository Participant
y
Rematerialization is just the reverse process of
Dematerialization which we understood above. Here
the electronic holdings are translated back into
the physical certificates. Freezing and
Defreezing are the temporary processes. Freezing
the Demat account means suspending the
transactions for some reasons for some time. And
Defreezing the Demat account means releasing the
account from the frozen state. This is done as
per the instructions or requests by account
holders. The Closure of the Demat Account is the
permanent deactivation of the Demat Account. If
an investor think of closing the Demat Account ,
that can be done after clearing all the due or
negative balances in the account. All these
procedures are carried out in a systematic manner
with proper documentation.
There exists an another Account called Trading
Account that acts as the bridge between your
Demat Account and Bank Account which allows you
to trade actually in the market. It is essential
to open along with the Demat Account. There is a
thin line of difference between the Demat Account
and Trading Account. On one hand where Demat
Account is used to hold the stocks and record the
buying and selling of stocks. On the other hand,
Trading Account enables the person to actually
carry out the Buying or selling transaction with
ease. With both these accounts opened, investors
can easily get started with the investing and
trading as per their need and convenience. At
times, investors decide to transfer their shares
from one Demat account into another for the ample
reasons such as if one would like to change their
broker, or want to club multiple Demat accounts
into one or vice versa etc. The transfer of
shares takes place in both online and offline
modes. Some of the important details such as
Target Client ID, ISIN (International Securities
Identification Number), DP Name (Name of
Stockbroker) etc. should be mentioned while
transferring the shares.
From the above discussion, we understood the
significance of the Demat Account in great
detail. Remember, Demat Account is a stepping
stone to the success of both experienced investor
and a
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beginner. Investing with discipline, guidance and
right amount of knowledge manifolds the chances
of succeeding in the Stock Market.