DEMAT Account…Isn’t it, you have heard this term somewhere?
Let me tell you that it’s the first step to start with your investment in equities.
Stock market more popularly known as share market has seen a major technological shift from the way it initially started.
The Bombay Stock Exchange was founded in 1875 with an open outcry system where traders would stand on the floor and shout prices of stocks for buying or selling.
Then, money would be exchanged for physical receipts of the shares called the certificate.
However, this led to a great amount of paperwork and the settlements of trade agreements took time due to the need to deliver the share certificates.
In 1996, dematerialization of shares was introduced which digitised the entire procedure.
Dematerialization is the process in which physical share certificates held by an investor are converted into an equivalent number of securities in electronic form and credited into the investor’s demat account.
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Steps of Opening up a Demat Account:
Here’s a series of steps you can follow to open your demat account-
1. Collect an application form from any Depository Participant (DP) which is registered with SEBI and depository. You can log into SEBI website to look for nearest DP in your locality.
2. Submit the duly filled application form along with PAN card and proof of address like Passport, Voter ID card, Electricity bill, ration card, bank passbook, Adhaar, etc.
3. You’re required to enter into an agreement with the DP in a standardized format which specifies the detail of rights and duties of investors and DP.
4. Once you have signed the agreement and submitted the required documents, your DP will open your demat account and provide you 16 digit demat account number. The investments made in equities will be credited to this account and it will be debited (reduced) once you sell your securities.
An individual may have multiple demat accounts if he wants to.
Moreover, there is no compulsion to open DP account with your stockbroker.
Please make a note that you will be charged with annual maintenance fees for the maintenance of your account.
So if you are willing to invest in equities and enjoy the benefits of compounding by investing for long term, please go and open a demat account today.
Take care and keep learning!!