Essential factors to consider before opening a demat account

For the traders and investors in the stock market, there are a few things that must be known. One of the primary things is the Demat account. The word demat is much common for every trader today, but there are only a few people know what the demat is and how it works. The share traders and investors had to deal with physical shares in past when the computerization was not there. It was a time taking the process to transfer the shares from one shareholder to another, but with the computerization, it was made quick.

Demat account and its benefits:

The demat account helps the investor in buying and selling the shares and securities safely and securely over the internet. With a demat account, the investor doesn’t need to make repeated trips to the stock market. All the shares owned by the investor are electronically held in the demat account. If at all any mergers, consolidation, or bonus, the shares are transferred automatically to the demat account.

The depository participant who helps in opening the demat account offers a periodic statement of the holding and the transactions made. This helps in having an idea of the number of shares you are holding as well as the performance of the stocks in the market. The demat accounts allow the investors in holding both, debt and equity investment in one single account. The investor is not required to open various accounts for holding different financial investments. The debt and equity all can be consolidated into a single account. 

There are various types of Demat accounts in the market to choose from. Before you choose a Demat account offered by the broker, here are few things to check:

• Charges

The charges for opening the demat account depends on the company you choose. Many brokers these days’ charge nothing for opening the demat account. They simply charge the annual maintenance fee which is based on the account type and the transaction during the year.

On the other hand, these brokers charge some percentage of the transaction as brokerage. The investor has to deposit a minimum amount based on the account type which is utilized for trading.

• Time taken for opening the demat account

Generally, it takes almost a week for opening the demat account. The processing time for opening the demat account depends on the verification of the details that you offer in the account opening form. The details are verified by the Depository Participant. After the processing is done, you will receive a welcome kit along with details such as account number and passwords. The account can be accessed on the basis of the details provided. The account is usually opened with no minimum balance of shares.

•  Frequency of usage

The major criterion for choosing the demat account is the frequency of usage, i.e., how frequently you trade the shares. The brokerage is charged based on the transaction style. Explore for more information on the tips and process to open the demat account.