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What is an aspect of Demat Account? First, you have to introduce Demat Account in a simple language.
Today we will know what Demat Account is, why it was needed, and its relation with the stock market? How does Demat Account work? And most importantly for those who want to invest in the stock market.
As always, it is the resolve of Information4U to reach all of you in straight and simple language on all these points. So without delay, let's start -
What does demat mean? What is DEMAT meaning?
Before knowing about the Demat account, what is Demat? It is important to know this to make it easier to understand further information.
DEMAT is fully called DEMATERIALISATION which means "to do paperless", that is, to change the paper form of the shares to digitize or dematerialize them. So this whole process is called DEMATERIALISATION in short DEMAT.
What is a Demat Account?
The way we open an account in the bank to dematerialize the hard cash kept with us so that its security can be increased and the convenience of doing transactions, in the same way, for trading shares/equities in the stock market.
The account used for the convenience of keeping them at one place during the period is called the Demat account. In Demat Account, your shares are dematerialized and saved in digital form.
Demat is necessary for investing in the stock market because the shares are operated from the demat account when buying and selling shares. Shares get credited in the demat account only after 2 days of the transaction.
We also know from the above-written information that the Demat account is directly related to the stock market. Therefore, if you want to invest in the stock market, it is necessary to have a Demat account to keep the purchased shares.
Why was Demat Account needed?
When the stock market came into existence, the technology had not expanded so much, nor was there any medium to digitize. So at that time, companies gave a kind of paper certificate to the shareholders as proof, which the shareholders could show in the future and sell their shares.
There were some major flaws in this whole process, such as –
The first drawback was that the certificates were in paper form. There was a risk of the certificate being damaged, lost, or stolen. An additional responsibility on the shareholder would have increased to maintain them. Having a Demat account made it easy to save shares easily and increased their security.
The second drawback was the buying and selling shares as shares were in physical form. If one wanted to sell or buy shares, they had to first go through an official and lengthy scrutiny process to ensure that the right investor bought the shares. Going close Through Demat Account, it became easy to buy and sell shares easily and in less time.
It was most important to remove the third drawback. It was very important to have a simple tracking system for the smooth running of the stock market. Companies earlier needed more people to track their shares and shareholders. As a result, there was a possibility of mistakes and manipulation. Having a demat account made it easy to track all the shares and their shareholders.
The National Stock Exchange had instructed the shareholders to deposit the shares in the Demat Account since 1996.
How does Demat Account work?
Demat account works just like your bank account. Share transactions are done through Demat Account on the same principle. You keep your money in the bank and buy anything by doing online transactions when needed.
Where and how to open a Demat Trading Account?
In today's digital time, an online facility is available for everything. We can also use and open Demat Accounts like online banking.
Today many discount broker companies in the market open your account through online mode, like
You can also open a demat account through your bank, but their maintenance charges are slightly higher.
What is the benefit of Demat Account?
If you want to invest in the stock market, it is mandatory to have a Demat account.
Shares are not stolen by having a Demat account, nor is there any fear of getting spoiled like a physical certificate.
There is no cheating in the buying and selling of shares.
Investors can track their shares whenever they want.
Conclusion :
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