What is dematerialization?
Summary:
In general, dematerialization refers to converting physical securities into digital form so that it becomes easier to maintain your assets and access your portfolio anytime.
The Demat account is a repository of information for all your securities transactions in India. All the transactions related to buying and selling stocks, bonds, mutual funds, and exchange-traded funds (ETFs) are recorded timely in the Demat account.
In the past, people usually held shares in physical form, which was complicated to do and made storing and transferring shares a lot more complicated.
But the arrival of the dematerialization facility helped make handling shares more accessible and convenient. To convert physical shares into Dematerialized form, one needs to open Demat and trading account online with a depository participant.
Why is a Demat account needed?
The Securities and Exchange Board of India (SEBI) has made it mandatory to open a Demat account online for trading or to invest in Indian securities. This means that this account is compulsory, and a person without this account is not eligible to trade or invest in securities under any situation.
However, Demat accounts are not just about compliance. They also provide some useful features like having permanent documentation of all securities transactions along with other benefits, such as:
- You will get a safe wallet. A Demat account is a secure wallet to hold securities in digital form. Investors don’t have to stress about misplaced physical certificates, theft, or fraudulent trading of their stocks and bonds.
- Execute the trade immediately. With the help of this account, trading and investment-related transactions can be processed instantly as it helps investors/traders convert their shares into electronic form seamlessly.
- There is no additional stamp duty. Investors can choose any number of securities of any kind to trade.
- Demat trading accounts do not have any extra paperwork costs and stamp duty charges upon the transfer of shares. These allow investors to trade freely without worrying about limiting the number of their securities to accommodate costs.
- Obtain up-to-date information about the market. Having the best Demat account allows you to access helpful market information and trends; for example, you can check real-time price charts and investment comparison tools.
All this helps the investor receive the necessary information they need to invest and trade correctly.
There are no transaction requirements. Demat accounts have no requirements regarding the maintenance of minimum balance.
This relieves stress for inactive or long-term investors looking to trade or invest sporadically. In addition, an investor can also freeze their Demat account for a period to control the flow of transactions to the report.
Each investor and trader must open a Demat account with securities such as stocks, bonds, and mutual funds in their investment portfolio. Demat is short for dematerialization – a Demat account is an electronic record that tracks your ownership of a tradable asset.
If you want to open the best Demat account in India, we suggest you consult RKFS immediately. It is one of the top financial services providers in India, having a well-experienced team with the right tools and level of commitment.