A Demat Account allows you to keep share certificates and other securities that you own in an electronic format. If you want to invest in the stock market, a Demat Account or Dematerialisation Account is a primary requirement that you must fulfill.
A Demat account is where all your stocks are held and the process of opening the account includes signing a couple of agreement papers that include a ‘specific’ Power of Attorney [PoA] to the broker. In this article, we will discuss 4 things that you should consider doing before opening a Demat Account.
1. Choose the right type of Broker – To be able to buy and sell shares, you need to choose a broker or a brokerage firm, through whom you will be carrying out transactions. A brokerage firm can be of two types, discount broker or a full-service broker. A discount broker lets you trade in stocks, futures, and options.
Whereas, a full-service broker gives you the option to invest in personal finance products like mutual funds and Initial Public Offerings (IPOs) in addition to the services mentioned above.
2. Review the Charges on the Account – The decision of selecting a broker while opening a Demat Account is usually influenced by the fees that are charged by the brokerage firm. You should be careful about the one-time and recurring charges while opening a brokerage account.
Also, look for the charges that are charged on trading/investing in different segments. It is advised to select the broker who charges a flat fee on all types of transactions.
3. Nomination – In case of your demise, all the investments you own are transferred to a nominee that you choose at the time of opening the account. You need to give a thorough thought while choosing a nominee as this will set the finances of your family. The person you nominate ought to know about it to carry forward your investments and meet the objectives.
4. Online access and support – Another factor that you should look into before opening a Demat account is the trading software. You should confirm whether the software is user friendly or not, as unnecessarily complicated software can make trading difficult for you.
Choose a simple software and user interface to make investing easy. Also, despite the advancement in technology, things can go awry while trading. In such cases, you need efficient tech support. Check the broker and the back-end support before you make a decision.
These are the things that you need to consider before opening a Demat account. And now that you know these things, it is time to move on to the next question. And that is, how to open Demat account?
Opening a Demat account is very simple. You just need to follow a few easy steps to open an account.
Step 1 – Do thorough research and select the place you want to open a Demat Account with once that is done choose the Depository Participant to open a Demat account.
Step 2 – Fill the form and submit it on time along with all the necessary papers and a photograph. You will also require your PAN Card to complete the process.
Step 3 – A document with the rules and regulations, the terms of the agreement, and the charges that you will have to pay will be given to you. Go through the details properly.
Step 4 – A personal validation is an important part of the process. A associate of the Depository Participant’s staff will get in touch with you to verify the details you mentioned while filling form.
Step 5 – Once the authentication is complete and the application is processed, you will be provided with a Demat Account number and a client ID. With the help of the account number and ID provided to you, you can access your Demat account online anytime and anywhere.
Opening a Demat Account is one of the best decisions you could make as it will allow you to trade in the equity market and fetch high returns. Services to open a Demat account are commonly available at most brokerages and monetary institutions. Do proper research before making your choice.