Earlier was the time when buying and selling securities was costly and time-consuming. Securities were held in the physical form and there was the risk of damage. But now technology has made it easy and safe for people to invest in the stock market. With the introduction of a demat account, investors can hold their securities in electronic form. Read to know more about the benefits of Demat accounts.
- Lower the risks: Physical securities invite the risk of theft, damage, or misplacement. In addition to it, bad deliveries and forging of physical shares are common. Opening of Demat accounts provides the holders an option of holding all their securities in the dematerialized form. This implies that now all the risks related to physical holdings such as wear and tear or getting stolen are eliminated. Also, another key benefit of Demat accounts is that no one can forge the holdings and the owner can’t be impersonated in the exchange.
- Receiving the stock dividends: Demat account has made it easy and quick to receive stock dividends, refunds, and interest. All these incomes are credited automatically to the account of the receiver. Now, with the help of electronic clearing service (ECS) it has become convenient to update the account of the investor with the bonus issues, public issues, stock splits, etc.
- Dematerialization of securities at low cost: Everyone wants to opt for low-cost services. When securities are held in the physical form then there are several additional costs like stamp duty, handling expenses, brokerage charges, etc. And the early determination of these costs is not that easy. Whereas, holding securities in the dematerialized form is less costly. You will have to just pay brokerage charges. If you possess the holdings in physical form then the same can also be converted into electronic form by just paying a minor amount of money to the depository participant (DP).
- Easy transfer of shares: The process of transferring the dematerialized shares on buying and selling them has become much more instant. Earlier, the transfer of shares in a physical form used to take at least one month. With the Demat account, the transactions have become seamless and the costs have also been reduced as there is no need to pay stamp duty on the transfer of dematerialized shares. This is the very reason that now holdings of investment are mainly stored in the electronic form.
- Facilitate the opening of a trading account: An online trading account is opened by those people who want to trade in different shares and securities. This account helps them to buy and sell the securities in the market. You will have to quote your Demat account number to trade in the stock market with the help of a trading account.
Due to the numerous benefits of online Demat accounts, it has become imperative for investors to open them along with bank accounts. If you are interested in online trading then 5paisa is one of the best low-cost financial service providers. It is a user-friendly app and the brokerage model here is very simple.