Demat account is necessary for an individual who is planning to buy and sell shares as trading of shares in physical form is not encouraged.
This account allows an individual to hold shares in an electronic form. It can be used only for saving of shares and not for the transaction.
In another account, the main transaction of shares is done called as a trading account.
Depositories provide the facility to open and maintain demat account such as CDSL and NSDL in India.
Facilities in Demat Account
- Once you open demat account, one can hold the shares in an electronic form
- Investors can hold debt and equity holdings in a single account
- One can also rematerialize in physical form if needed
- One can avail loan by pledging the shares
Also read: Benefits of opening Demat Account
6 Things to consider before selecting a Demat account.
1) Account Opening Charge
This is a fee charged for opening a demat account. The fee varies depending on the Depository Participants. Now, some DPs allow you to open a free demat account.
2) Annual Maintenance Fee
The fee required to maintain the account. Usually, it is charged in advance.
3) The Reputation of the Broker
Some brokerages may offer you less fees. But what matters is service. Check for the review and choose based on reputation.
As some brokerages may be involved in unlawful activities.
Each brokerage has their own software. Along with that check their web-based application so that you are comfortable while trading.
5) Investing Tips
Do not blindly follow investing tips, do your research and home work before choosing a stock. Do not pay for the packages offered unless you are sure of the services.
6) Mobile Apps
Check whether they are updated with latest technology like mobile apps and services.
What are 3-in-1 accounts?
Such accounts are usually provided by banks where they offer savings account, trading account and demat account where all accounts are linked.
But such accounts are offered at higher cost and minimum balance maintenance will be applicable.
ICICIDirect, HDFCSecurites, Kotak Securities, SBI Cap Securities are some of the leading players in this segment.