As we all know, Demat accounts are essential in the current trading environment. The debut of Demat accounts in India in 1996 marked a turning point for the nation's stock markets. By eliminating the risks of fraud, forgery, and loss, Demat and electronic trading systems not only made trading simpler but also cut the cost of trading.
Although access to Indian financial markets is made possible by having a Demat account, is this the only benefit? Absolutely not! Demat accounts have many additional benefits and mysteries. If you're an investor, you should be familiar with the Demat account services.
If you're curious about what Demat account services might offer, read on:
1. Safety And Security
The main benefit of having a Demat account is ensuring the security and safety of your financial assets. Before the advent of Demat accounts, shares were traded as paper certificates, which included the danger of theft or destruction. Recovering duplicate shares in such a situation was challenging.
Demat accounts hold all your financial assets electronically, guaranteeing maximum security and safety. Dematerialized assets have very little chance of being taken or misplaced.
2. Seamless Settlements
Before the Demat account, securities were traded using paper certificates. Every securities transaction would take 14 days to settle since the paper certificates were sent from the seller to the RTA and then to the buyer. Investors have saved a tonne of time and work thanks to Demat accounts, which have reduced the settlement duration from 14 to 2 days.
3. Reduction In Errors
Trading actual share certificates required a lot of time-consuming, error-prone documentation. Although most of the job began to be managed by computers, significantly reducing the chance of errors when Demat accounts and electronic trading systems were launched.
4. Increased Liquidity
Whenever you need money, you can get it if your investment has liquidity. In addition, your dematerialized investments, like stocks and mutual funds, can be pledged as security to obtain a loan from a bank, further facilitating liquidity and monetization. With a Demat account, such advantages are attainable.
5. Storage For Other Financial Assets
You might believe that a Demat account can only be used to keep shares, which is different. Most of your financial assets, including bonds, ETFs, debentures, and unit-linked insurance products, are stored in a Demat account. Having all your assets in one place makes tracking and maintaining them much more straightforward.
6. Easy Management and Accounting
Having all your financial assets in one location makes managing and maintaining your accounts and records simple. In addition, keeping these records is required for annual audits and tax filings. This was only because your assets had been spread out among other accounts or physical forms.
7. Convenient Transmission
In the terrible event of the account holder's passing, the funds in a Demat account can be easily transferred to the nominee of the next of kin. The service provider will ask for a nominee when you open a Demat account; this person will be the legitimate owner of your property after your death.
Conclusion
Having a Demat account has a few less well-known benefits or mysteries. First, you have access to and exposure to various financial assets through Demat accounts, not stocks. On either depository, Demat accounts can be opened by depository participants or Demat service providers. Some of the depository participants also offer a free Demat account. After setting up your Demat account, you are prepared to start your investment journey.