March 21st, 2022 | Updated on June 29th, 2022
A Demat account is a valuable tool for investors who wish to store their shares digitally. It also allows seamless tracking of each investment made by a trader or investor.
These investments can be in the form of exchange-traded funds, mutual funds, and shares at a single location. Let us have a look at the advantages of opening a Demat account.
1. Can Avail Loans
You can utilize the securities stored in your Demat account to get loans from different types of banks. You have the option to use these securities as collateral to get access to loans from various banks.
2. Negligible Risk
There is always a risk associated with physical share certificates since these can be stolen, forged, or damaged.
Before we had the Demat account, shares came in the form of paper certificates. Suppose you had a shareholding of Company ‘X’; you had to store physical certificates of those shares. This was inconvenient and a kind of burden.
These physical shares also involved truckloads of paperwork which was done away with the introduction of the Demat account. Now handling all your shares is super easy and convenient.
3. You Can Open A BSDA
A Basic Service Demat Account is a type of Demat account meant for the usage of small traders and investors who don’t have the time or resources to regularly invest in bonds, mutual funds, ETFs, stocks, etc. The excellent part about BSDA is that you don’t have to pay a lot to open and maintain it.
BSDA was introduced since SEBI felt that most of the Demat account holders need not pay substantial maintenance fees despite the non-heavy usage of their account. SEBI introduced these kinds of accounts for helping out such types of investors.
4. Easier To Store Shares And Transfer Them
You can hold a large number of shares with the help of a Demat account. You can easily trade large volumes of shares and stay updated about all the details related to the transactions you make and the orders in your Demat account.
You can also transfer shares quickly to another Demat account without facing any roadblocks.
5. Fewer Costs
As soon as people learn that a certain thing has a lot of advantages, their first reaction is that they would have to pay a high cost to get the utility.
Physical securities demanded additional spending from one’s pocket, which went towards its stamp duty and different aspects such as handling.
You cannot estimate these costs beforehand. However, if you choose to switch to Demat accounts, these costs will be reduced to zero automatically.
The only charge you would need to pay would be your brokerage charges which you will learn beforehand, and there won’t be any surprise costs.
6. Automatic Updating Of Bonuses And Stock-Splits
Suppose you are a shareholder of a particular company and the company decides to bring some modifications in their stock, such as stock split or bonus.
In that case, you will discover that it will automatically update your Demat account. All open Demat account guides have talked about this feature when you look up more details about Demat accounts.
7. Less Time
Buying and selling shares is a procedure that occurs instantly without any considerable delay. In the case of physical certificates, the time taken used to be a lot.
When we do transactions using a Demat account, there is no involvement of paper share certificates which take up a lot of time. Securities are kept in a dematerialized format to keep trading a more convenient activity.
8. Facility To Nominate
With a Demat account, you also get the facility to nominate under the procedure laid out by the depository.
In situations where the investor expires, if he has appointed a nominee, the shareholding will be transferred to his name. This feature is quite handy and attracts a lot of investors.
9. Holdings Are Inconvenient
Trading demands one to have several types of physical documents ready with them at different times. The maintenance of these records is a cumbersome duty to perform.
You can avoid all this work if you decide to go with Demat accounts. Whatever documents are necessary, your depository participant takes care of them and stores these documents safely.
Your investment record is also maintained regularly and updated from time to time.