Beginner’s Guide to Demat Account
Demat account is mandatory if you want to trade in Indian stock market. This account converts the shares from the paper form into an electronic form so it is called as dematerialized account or Demat account.
Online share investment is considered as an important hedging tool combating inflation as this menace can deny you from your profit margin. Opening a demat account for online stock trading in India is one of the most preferred ways to meet rising cost. It is the most secure and convenient way of trading shares and securities.
The Reason Behind Opening a Demat Account
There are several reasons behind opting for opening a demat account in online share trading, as it presents avenues to obtain high financial returns. In sharp contrast to the opening of a savings account with a bank as online stock trading can yield up to 20% in returns. Investing in shares is great in an inflationary environment as the rise in the price of shares quickly cancels out the effects of inflation.
The dividends that are given out on a company´s stocks are completely tax free. Whereas, the interest accrued on a fixed deposit is taxable.
The pace at which you will be making money by investing in shares is greater than having bank saving’s products or post office savings.
Rising rate of inflation dissolves the returns from bank savings as well as post office savings, whereas investing in shares is great in an inflationary environment as the rise in the price of shares quickly cancels out the effects of inflation.
There is also greater liquidity in investing in a share market as buying and selling is very fluid unlike investment in bank savings. And as the name suggests a fixed deposits rate of interest can’t change until the end of its maturity, and it involves low risk and naturally you get lower returns.
Things You Should do For Demat Account Opening
Opening a demat account nowadays is very convenient and fast with its help you can trade in shares and transaction of sale and purchase of your securities is done electronically, and you can have peace of mind as all trades are transparent and safe.
You need to subscribe to a broker and with the help of the broking company, you will be able to open a demat account, simply fill out the opening form and your account will be opened in no time. There are several top notch brokers in India and can be found with ease over the internet.
Make sure that you fill in every detail mentioned in the account opening form. And submit the same to your broker.
You should produce documents of address proof and identity proof along with the duly signed opening form.
Demat account is very similar to pass books offered by the banks where you have opened an account. Using the Demat account you can easily buy or sell shares of different companies. All the transactions are entered into it just like it’s done in the bank passbook. Once your account is opened, a single demat account number will be provided to you that needs to be specified for every transaction.