To trade in the modern financial world, it is essential to have a demat account. Before the introduction of demat accounts, traders had to deal with physical stock certificates, which posed challenges in terms of safety, accessibility, and efficiency. However, now that demat accounts are around, these issues are gone.
A demat account allows traders to hold their securities in electronic or dematerialized form, providing numerous benefits over traditional paper-based trading. In this post, we will discuss the need to open a demat account, as well as the steps involved in trading using a demat account. Additionally, we will discuss how stock market apps can benefit traders.
What is the need for a demat account?
Let’s look at some of its most important features to understand why demat accounts are so important to trading:
Prior to electronic trading, traders had to rely on physical stock certificates to conduct trades. In 1996, the demat account was introduced in India and solved this problem. Demat accounts enable traders to hold their securities dematerialised or electronically.
As opposed to dealing with paper certificates, holding securities in a demat account keeps them safe and makes them more accessible. Moreover, the demat account is similar to a bank account in which you store your money electronically. Additionally, your demat account can be debited or credited, and even have a zero balance.
How To Trade In A Demat Account
Here are the 4 steps to trade in a demat account:
Get a PAN card
You need a PAN to buy shares and trade on the stock market. The Income Tax department issues PAN cards. Moreover, online or through an agent, you can apply for a PAN card.
The Indian government requires all financial transactions to include the PAN number. The government uses PANs as a way of tracking the tax liabilities of Indian citizens. After you receive your PAN, you can open a Demat account.
Open Demat and trading account
To open a demat account, find a depository participant (DP) that provides premium services at an affordable price. You can open a free, technology-enabled demat account with blinkX. They also provide detailed research and guidance.
Additionally, the use of an online trading account allows you to purchase and sell shares both online and over the phone. To buy shares online, you must visit the broker’s website or download the stock market app from the Google Play store or Apple App Store.
However, if you’d like to place orders over the phone, you’ll have to contact the broker’s trading helpdesk. Brokers may charge a nominal fee for placing orders over the phone. However, placing an order online is free.
Link your account
Link your trading and demat accounts. Both trading and demat accounts can be held in separate companies, but it is advisable to keep them in the same company. Share trading also requires a bank account. Because in order to invest in the stock market, you need to transfer your funds from your bank account to your online trading account.
Start trading
To start trading, place an order through the account. After that, your broker will connect you to the exchange. Once the order is placed, it’s processed at the exchange. All the details of the transaction will be checked by the exchange, along with relevant details about a trader’s demat account. Upon processing, the shares or securities are instantly credited or debited from the demat account.
Benefits of trading in a Demat account
With a demat account, trading becomes easy and convenient. The advantages of trading with a demat account don’t end there. Here are some more:
Accessibility: You can trade with your demat account on the go. From your smartphone or tablet, you can track market trends, place trades, and monitor your portfolio.
Easy Transfer of Shares: Demat accounts make it easier and more convenient for everyone to transfer shares. In the past, it used to take weeks to settle a trade, but now with demat accounts it’s faster.
It helps you get a loan: One of the biggest benefits of holding all the securities in a demat account is that it makes it easy to get a loan. Investors or traders can use their securities as collateral to get loans.
Conclusion
The advantages of trading in a demat account are numerous. Demat accounts make it easier to transfer shares, avoiding the time-consuming process of physical settlement. Furthermore, you can use securities as collateral for loans, which helps you get more money.
Also, by using stock market apps, you can conveniently manage demat accounts through smartphones or tablets. By having real-time access to market trends, you can place trades easily, and monitor your portfolio seamlessly. Overall, the key to trading in the modern world is having a demat account. The demat account ensures a safe, efficient, and convenient trading experience.
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