Investing in the stock market has never been more accessible, thanks to the era of digitalization. There are currently over 139 million Demat accounts in India as at December 2023 and it’s clear that more and more Indians are taking charge of their financial future.
This article is meant to guide beginners on demystifying what a Demat account is and how they can use it for smart investing.
Demat Account- An Explanation
Think about a bank account, but only this time replace money with shares, bonds, mutual funds and other securities which are kept electronically. That is what we refer to as a Demat Account. It is like your investment’s digital locker where your transactions shall be seamless and fast while at the same time protecting them from theft. The process of moving Indian securities from physical forms to electronic formats started with the Depository Act in 1996.
Locating a Broker
Usually you will find it quite easy setting up a Demat account either through websites or apps available online. Just select any Depository Participant (DP), usually referred to as stock broker go on their site or even download their app. To register, enter your details after downloading their app or visiting their website such as your PAN card or any other required document which includes bank statements as well proof of address.
You will be provided with a Demat account number once your application has been processed Once the application is processed and the account is opened, you will receive a Demat account number. This number is required for accessing your Demat account online.
Operating a Demat Account
A demat account functions in the same way as a bank account. The buying of shares and the storage of these shares into one’s Demat Account is possible. Upon sale of the shares, it will be debited from your account. This facility also allows you to move shares from one Demat Account to another. It is necessary to regularly scrutinize a Demat Account statement which discloses transactions and securities within it.
Regulations and Safety
Securities and Exchange Board of India (SEBI) regulate demat accounts in India while National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are two main depositories in India . It also enables safekeeping for all investors since a unique BO ID (Beneficiary Owner Identification Number) is provided for every individual investor. The transactions are kept in a central database known as demat accounts, where investors can pull out transaction statements once in a while.
Smart Investing
In other words, a demat account provides an open platform for smart investing. It assists you to keep track of market trends so that you make sound investment decisions accordingly. Such things like diversifying one’s investments, understanding long term versus short term investing or tracking your portfolio are some of the strategies for smart investing. To illustrate, spreading investments
Common mistakes that beginners should avoid
As a beginner, you might make some common mistakes while using a Demat account. Some of them include keeping your portfolio undiversified, investing on the basis of market rumors and failing to monitor investments. This is important for effective portfolio management. When all your money is invested in one stock, it may be risky for you to find yourself in such a situation. Instead, it’s better to spread out your investments among various stocks.
Learning Resources that are Continuous
To keep learning about investment, books like ‘The Intelligent Investor’ by Benjamin Graham and ‘A Random Walk Down Wall Street’ by Burton Malkiel can be referred to as resources. It’s also possible to get useful information from websites like Investopedia.
In Conclusion
If you want to invest in the stock market then you cannot do without a Demat account. Why? Because it makes holding shares and trading easy as well as guarantees security of your securities. So why not start now? Open a Demat account today and begin on the road towards smart investing.
It is worth remembering that investing in stock markets involves risks. One must understand these risks before investing his or her money elsewhere. In case you need a reliable full-service stock broking firm in India, think of Choice brokers who have been operating for over 25 years now making both trading and investing simple for new investors with their Choice FinX app, a super app for all trading and investing needs. Happy investing!
Please note, that this article is intended to provide general information and is not to be considered as financial advice.
