If you want to enter the world of investment, one of the very first things that you will come across is a ‘Demat account’. A Demat account, also known as the Dematerialized account is a type of account for traders which is used to hold shares and securities in electronic format. It is much like a bank account; the only difference being, a bank account holds cash and the Demat account holds shares and other securities. Contrary to popular notion, opening a DEMAT account is exceedingly simple. In this article, we have shared a step-by-step guide for the same.
Steps to Open a Demat Account Online
Step 1 – Visit the official portal of a broker or online investment platform, like Groww.
Step 2 – Fill the online application form for a DEMAT account; ensure the number you provide is the same as that on your Aadhaar card.
Step 3 – Furnish the necessary documents. You may also need to upload your signature.
Step 4 – Verify your credentials with the OTP received on your Aadhaar-linked mobile number. Depending on the facilitator, in-person verification might be the mandate.
Step 5 – Agree to the terms and conditions of the facilitator, and pay the account opening fee if applicable.
Voila! You have successfully opened a DEMAT account.
But, note that, this DEMAT account opening process may vary across brokers and investment platforms. Nevertheless, take a look at the documents you will need to open a DEMAT account in India.
Documents Required for a DEMAT Account
Opening a DEMAT account is a straightforward process, and only requires a handful of documents, such as –
- Aadhaar card
- PAN card
- Voter ID card
- Driver’s license
- Lease agreement
- Utility bills
- Income proof, like salary slip or ITR papers
- Bank account statements of the past 6 months
- Cancelled cheque
Please note, you may not be required to furnish all these documents. It depends on the mode of investing and the broker/platform you have selected.
However, there’s more to opening a DEMAT account than knowing about the application process and documentation. In the first place, you must understand the necessity of a DEMAT account.
Why is a DEMAT Account Necessary?
Besides the fact that it’s mandatory for trading in stock markets, here are a few reasons why this account is crucial –
A DEMAT account allows you to hold your share certificates in a dematerialised form. This eliminates any need to keep physical copies of those certificates, which are prone to loss, theft, and damage.
- Easy trading
Trading becomes notably simpler with a DEMAT account. It can be best understood as a bank account for all your securities. Whenever you buy or sell stocks, the equivalent units are automatically credited to or debited from the DEMAT account.
- All under one roof
A DEMAT account is not only for stocks, but also for ETFs, bonds, and other financial instruments. Thus, you can manage your investments much more quickly with this account. The account is also accessible at all times from anywhere, making your securities more readily accessible.
Also read: Step to Open Demat Account on Groww
Factors to Consider before Creating a DEMAT Account
It’d be beneficial to keep in mind the following factors when planning to open DEMAT account online –
- Charges involved
You may want to review all the charges involved with a DEMAT account before filling out the application form. The following list illustrates the various expenses you may need to incur in this regard.
- Account opening fees
- Share certificate dematerialisation charges
- Annual maintenance fees
Note that, some DEMAT account facilitators may waive the account opening and annual maintenance fees.
- Trading account
When you are opening a DEMAT account, it may be wise to link it with your trading account. It’s the account that you use for buying and selling securities. Thus, linking your trading account with its DEMAT counterpart will allow for seamless transactions and instant debit and credit of units. You can also look for brokers that allow you to open a trading cum Demat account.
Also read: How to Invest in Share Market
- Nominee Declaration
You can choose to file a nomination at the time of opening the account or later. Most experts recommend declaring a nominee at the beginning since later most people tend to miss this step altogether.
- DEMAT facilitator
It’s also vital to consider the broker or investment platform before you learn how to open a DEMAT account online. You might consider a facilitator that features trading across securities that you are looking for or would be interested in the future.
In this regard, it may be wise to opt for a broker or platform that offers investment options in MFs, stocks, gold, derivatives, and debt instruments to ensure more options at hand.
Also, check out the charges involved in trading as well. Some platforms levy a flat fee on trading; others charge based on the volume of transaction.
Analyse the cost-profit implications of both the moves based on your investment objectives to select a lender you could benefit with the most.
Lastly, review the convenience and ease of the trading platform of the DEMAT facilitator. A simple interface with easy-to-navigate features is the most suitable, especially for high volume trading.
Ensure that you check all these pointers before you open a DEMAT account online in India. It’d save you unnecessary inconvenience later and help you to maximise your trading benefits.
Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.