Many people who have experience of investing the stocks are familiar with the terms of Demat account. Accounts, that usually important to hold the securities and shares in the electronic form is known as Demat Account. The term ‘demat’ denotes the dematerialized account. This account holds the securities and stocks electronically instead of its physical form. To sell or buy the stocks, an investor needs to open the account. It is more like a bank account, except the fact that instead of depositing money, you need to deposit shares.
Today, most of the people do not prefer to trades in physical shares anymore. Practically, as all the trades need to be settled in the dematerialized form, it is quite important for investing and trading. In order to open it, one needs to approach a depository participant and needs to fill up the particular account opening form. There are two other documents that you require: Proof of Identity (POI) and Proof of Address (POA).
There are four different charges applicable to the demat account.
- Account opening fee is applicable at the time of opening it. You can go for the zero brokerage option also if you want to save a lot of money. All the depository participants charge the account opening fees. Zero brokerage account means you don’t need to pay anything to the broker while you are opening your account. Zero brokerage model is popular because you need to pay a little amount for every trade or just once in a month as the flat fee. Regardless of your trade size, you will need to pay the same low amount with such plans.
- Annual maintenance fees is known as the folio maintenance charge with the account and it charged usually in advance of opening your account.
- The custodian fee another part of this account. This is charged on a monthly basis and it usually depends on the number of securities come with the account.
- The transaction fee is charged for debiting or crediting securities from and to the account. It is also charged on a monthly basis.
It is completely a safe and secure way to hold your securities when you are investing in the stock market. Even transferring of securities does not require any stamp duty. If you are investing the first time, you can open it with zero brokerage of free of cost. You can eliminate the associated risks that come with physical certificates like destruction, theft, and bad delivery. There is no necessity of tough paperwork during the transfer of the securities are eliminated. Associated issues with the sale of physical shares like an odd lot can be eliminated with it. Even a single share can be sold with a demat account.
Shares can be credited automatically to the account during split, bonus, merger, etc. If you want to take your first step towards share market, you should first open demat account for more security. There are many trading apps online that allows the users to open the account with zero brokerage.