Dematerialization or demat accounts are mandatory if you want to trade on the stock markets. It is a digitalized form of trading in shares and other securities.
If you want to invest in stocks, you require three things. Firstly, a bank account to pay and receive funds is required. Secondly, you will require a trading account to buy and sell shares online. Lastly, you need a demat account for your security holdings.
A Demat account may be opened with a registered depository participant (DP). There are several registered DPs, and making a choice among these may be confusing. Here are five things that may help you make an informed decision.
This type of account entails certain fees and charges. Some of these include annual maintenance, conversion,and transaction fees. These may vary from one DP to another. You must check these charges before you decide to open an account with any of the registered DP.
- Bank account
You will have to link your demat and bank accounts. The bank account is used to receive funds when you sell your investments. The account is also used to pay for your buy transactions. Several DPs provide 3-in-1 accounts, which allow you to have all three types of accounts with a single entity. This makes it convenient for you to trade in the stock markets.
- Customer support
Ensuring good and reliable back-end support from the DP is crucial. There may be some problems you may face while transacting. If you have any trouble, it is important that an experienced team is available to ensure you quickly and easily overcome these issues. You may rely on reviews and feedback offered by customers to determine the reliability of the services before you choose your DP.
In case of your demise, all the holdings in your account will be transferred to your nominee. It is,therefore, important that you provide nomination details at the time of opening the account.
- Online access
Most DPs allow you to open a demat account online. Therefore, ensuring the platform is easy to use and understand is crucial. If you choose a DP that offers a complicated platform, it may be confusing and difficult for you to invest in the stock market.
A reliable DP offers real-time updates without the need for brokers. Furthermore, features like creating watch lists, an overview of your current holdings, bid and ask prices,profit or loss on individual gains, and history of buy and sell must be available. This will enable you to invest in the stock market while reducing the possibility of loss. However, conducting extensive research on different stocks and shares before making an investment decision is crucial.