Planning to open a Demat Account? Know all about it first!

Planning to open a Demat Account? Know all about it first!

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We can say that Indian banks have penetrated 99% of the households by ensuring essential services reach each corner. By now, you know how they function, and the services provided. Stock Trading is a popular activity globally. However, you require a secure place for storing share certificates.

Dematerialisation or Demat Accounts are like Bank Accounts that hold securities electronically. Every person should compulsorily open a Demat Account to trade in India. Since the storage of physical share certificates leads to loss or damage, the electronic facility eliminates these issues. You open the account through Depository Participants or DPs.

Depository Participants

They are organisations that enable contact between depositories and investors. The Securities and Exchange Board of India have registered the National Securities Depository Limited and the Central Depository Services Limited under it. DPs are brokers who spell out the requirements, terms, and fees to open a Demat Account online.

How to open it?

You need to follow a procedure on how to open a Demat Account. Firstly, approach the DP and fill out the required forms. Arrange the documents required. Upon successful completion of this process, you receive the account number. Access the Demat Account on the Online Trading app or website after activation.

Uses

A Demat Account enables investors to Equity Trade online. Buying and selling stocks happen through Online Trading platforms provided by DPs, where you place an order to buy or sell in the Stock Market. After placing the order, the money debits from your Bank Account, and the Demat Account gets credited with the shares.

Types

There are five significant types of Equity Trading in India. Scalping involves the buying and selling of Equity instruments within minutes. Day Trading is buying and selling carried out within the same trading day. Unlike scalping, Day Trading takes place until the market closes on the same day.Swing Trading depends on the price fluctuations. Traders close the position within a few days to several weeks.

Position Trading holds a position open for an extended period with the expectation of appreciation or depreciation in its value. Long-Term Trading refers to positions held by investors for months or years. It is complex and considers the potential value of the underlying stock before holding a position.

Benefits

There are manybenefits of investing in Equity Stocks. It enables participation in the growing economy and helps beat inflation. The Stocks are highly liquid compared to long-term Fixed Deposits or real estate. You earn returns through dividends and price fluctuations.

Points to note

It is mandatory to link your Aadhar UID with the Demat Account and fulfil the KYC norms by submitting primary documents. After the process, buy and sell shares online. Like a Bank Account, you can hold multiple Demat Accounts with various DPs

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