Open Demat Account

1. Ever seen famous investors like Warren Buffet, Ramesh Damani, Mohnish Pabrai, and Rakesh Jhunjhunwala making huge gains from the Stock Market? How do they do it? What are the reasons behind their success? Well, the answers to all these questions can be simply understood from one’s own experience and learning. Stock Market is a place where one needs to gain practical experience no matter how much theoretical knowledge one possess. Having Knowledge is extremely essential and advisable. But gaining practical experience and learning from one’s own experience is equally important. To get started with Stock Market, it is essential to open a Demat Market. In this article we will spend some quality time in understanding the Demat Account and its associated intricacies. Let’s understand what exactly a Demat Account in layman’s language is. It is similar to a Savings Account in the Bank. However, in this Account one can hold or transfer shares or stocks. It is a digital form of account. Demat Account is a short form for Dematerialized Account. The Process of Dematerialization can be understood as the method of converting or representing physical shares and securities in the digital format. With the help of Demat Account, one can trade in the Stock Market smoothly and conveniently. Investors generally face a dilemma of how to choose the best Demat Account. A Demat Account offered by any Brokerage firm should always be chosen based on the parameters such as the ease of opening of the Demat Account, Software and User Interface provided by the Brokerage firm, Trading Cost and Brokerage, Minimal Annual Maintenance Charges etc. The process to Open Demat Account is usually very simple. You have to fill out a Demat Account opening form online, then enter the required personal contact details, upload the necessary documents and fill out some of the essential details. Once the e-verification part is done, the Demat Account is ready for clients to start trading and investing. There are multiple benefits of the Demat Account that makes it quite popular. Demat Account saves a lot of time for traders. Within split second, the shares can transferred, bought or sold. Demat Account allows you to hold different securities such as mutual funds, equities, shares, bonds in one single basket. This provides flexibility and convenience to traders. Also, with Demat account, all orders and shares are secured at one place and traders need not to worry about the security of the shares which earlier was the case with the physical form of shares. There are some concepts and processes related to Demat Account that an investor should always have certain idea of. Some pertinent Terminologies of the Demat Account are Depository, Depository Participant, Rematerialization, Freezing and Defreezing and Closure of the Demat account. To understand these concepts, let us take an example. There is a place X where the electronic securities are held, it is known as Depository. Here the online buying and selling of securities is facilitated and an extensive record of holdings is maintained. There is an investor Y. And there is an entity Z called Depository Participant who is the authorized body that acts as the link between the X and Y. Z provides the facility of Demat Account to the investors. In simple terms, the Brokerage houses acts as the Depository Participants.

2. X Y Depositor Depository Participant Z Investor Rematerialization is just the reverse process of Dematerialization which we understood above. Here the electronic holdings are translated back into the physical certificates. Freezing and Defreezing are the temporary processes. Freezing the Demat account means suspending the transactions for some reasons for some time. And Defreezing the Demat account means releasing the account from the frozen state. This is done as per the instructions or requests by account holders. The Closure of the Demat Account is the permanent deactivation of the Demat Account. If an investor think of closing the Demat Account, that can be done after clearing all the due or negative balances in the account. All these procedures are carried out in a systematic manner with proper documentation. Dematerialization Digital form of shares Physical form of shares Rematerialization There exists an another Account called Trading Account that acts as the bridge between your Demat Account and Bank Account which allows you to trade actually in the market. It is essential to open along with the Demat Account. There is a thin line of difference between the Demat Account and Trading Account. On one hand where Demat Account is used to hold the stocks and record the buying and selling of stocks. On the other hand, Trading Account enables the person to actually carry out the Buying or selling transaction with ease. With both these accounts opened, investors can easily get started with the investing and trading as per their need and convenience. At times, investors decide to transfer their shares from one Demat account into another for the ample reasons such as if one would like to change their broker, or want to club multiple Demat accounts into one or vice versa etc. The transfer of shares takes place in both online and offline modes. Some of the important details such as Target Client ID, ISIN (International Securities Identification Number), DP Name (Name of Stockbroker) etc. should be mentioned while transferring the shares. From the above discussion, we understood the significance of the Demat Account in great detail. Remember, Demat Account is a stepping stone to the success of both experienced investor and a

3. beginner. Investing with discipline, guidance and right amount of knowledge manifolds the chances of succeeding in the Stock Market.