Dematerialization is the practice of holding shares and securities in electronic format for easy trading. A Demat Account facilitates easy trading by allowing users to hold shares and securities in electronic format. By being able to trade, hold, and monitor at the same time, the entire investment process can be made quicker, more convenient, and cheaper. It is like your bank account, essentially.Having a Demat account means you do not have to hold physical share certificates. When securities are bought and sold, they are immediately reflected in the account. The account holds shares and securities electronically.
An individual can use a Demat Account to hold any investment, including shares, bonds, mutual funds, government securities, and exchange-traded funds. Whereas a bank account holds cash, a Demat Account holds securities. Demat accounts allow the investor to buy and sell, as well as transact with a large variety of products, aside from shares and stocks, conveniently under one roof, and without the necessity of any paperwork on their part. In addition, there are the corporate advantages of directly updating bonuses, rights shares, and stock splits in the account.
Benefits of a Demat account:
- Secured transactions: Demat accounts offer safety and security because they are not physically held by the investor. Physical assets carry the risk of loss or theft when held physically. Even in the case of loss or theft, there would be a massive amount of paperwork and operational challenges that an investor would have to go through before he would be able to try and recover those assets. The benefits of holding shares in Demat form outweigh the disadvantages. The chances of assets being stolen or lost are negligible when holding assets in Demat form.
- Quick & easy transmission: A Demat account holder’s assets can be firstly transferred to their next of kin in the unfortunate event of their passing through the dematerialization process. In the past, shares were held in physical form, and the legal heirs had to go through a lot of hassle to claim rights over the company’s financial assets. Opening a joint Demat account or adding the next of kin as a nominee has enabled this to become possible.
- Multipurpose use: As well as storing your shares, Demat accounts store all your financial assets, including debt instruments, bonds, mutual funds, unit-linked life insurance, etc. A Demat account is a good option if you want to keep all your assets under one roof for easy tracking and maintenance, as well as transparency when it comes to your tax filings since all the records are kept in one place.
- Liquidity: Additionally to making transfers simple, dematerialized accounts ease the process of liquidating assets. It is easy to liquidate shares, mutual funds, etc. by selling them or taking loans against them if you have these assets in a dematerialized status. Assets held in physical form cannot be easily liquidated and monetized. By introducing Demat accounts, physical shares can now be bought and sold even in just one share, as opposed to physical shares being sold in lots.
To open a Demat account, take help from 5paisa and start your investing journey now, as they are the best in the town for helping people with online share trading.