What is demat account?
Demat is the abbreviation for “Dematerialization”, which means to convert physical shares and securities into electronic form. Demat Accounts are required to hold shares in electronic form instead of paper form. Demat Accounts keep the shares safe, thereby preventing loss of shares or risks related to forgery. It is an easy method to trade securities quickly. A Demat account and a trading account are necessary to carry out the trading of shares in the stock market.
A demat account helps investors hold shares and securities in an electronic format. This kind of account is also called a dematerialised account. It also helps to keep proper track of all the investments an individual makes in shares, exchange-traded funds, bonds, and mutual funds in one place.
With regulations by SEBI (Securities and Exchange Board of India) in place, and the transparency of online transactions, operating a Demat account is generally a safe process.
Demat account is mandatory for trading shares or equities. Your demat account holds your shares in electronic form. Since demat account is used to store shares and not money there is no minimum balance that you need to maintain.
You cannot have multiple demat accounts or multiple trading accounts with the same Depository Participant (DP) or the same broker. Therefore, if you have a demat account or trading account with a DP or broker, you cannot open another account with them.
The easiest way to buy stocks is through an online stockbroker. After opening and funding your account, you can buy stocks through the broker’s website in a matter of minutes. Other options include using a full-service stockbroker, or buying stock directly from the company.