Traditionally, in India, the general populace stayed away from the stock market. To many, investing in the stock market was synonymous with gambling. Many considered the stock markets to be a place where only those with a lot of fortune invest their money. However, today this mindset is rapidly changing as the general public continues to learn about the benefits of investing in the stock market. In fact, more people prefer to invest their money in the stock market over fixed deposits day by day. If you have just learned about investing in the stock markets, you surely may have stumbled upon the term Demat account or Demat apps. This article will tell you 4 reasons why you should open a Demat account.
What is a Demat Account?
Before diving into those 4 reasons, or before learning how to open a Demat account, we need to know what a Demat account actually is. You can think of a Demat account like your bank account. Similar to how you require a savings account to store your money, you require a Demat account to store your shares. You purchase them whenever you invest in shares, and the shares get deposited in your Demat account. In the same way, when you want to sell those shares, they get withdrawn from your Demat account. You can open a Demat account by approaching a depository participant like Kotak Securities. Now let us dive into the 4 reasons why you should be opening a Demat account.
Reason 1: Makes Investing Convenient and Instant
The inception of Demat accounts has made online investing possible. Before Demat accounts became the norm, you had to invest through a traditional broker. Your broker would then physically go to the exchange and purchase shares for you. These shares were also in the physical format, i.e., one would trade physical share certificates back then. One of the major problems with this type of investing was that it was a tedious and time-consuming process. It could take several days for the transaction. However, today, if you have a Demat account, you can invest in shares using your mobile phone from the comfort of your home. A Demat account also lets you invest in shares instantly.
Reason 2: Keeps Your Shares Safe and Secure
The shares in your Demat account are safe and secure. Unlike the traditional share certificates, they are not vulnerable to physical damage. Since shares are digitally stored in your Demat account, they also cannot get misplaced. A lot of fraudulent activities were easily carried out in the case of physical share certificates. For example, theft was not uncommon, and it was easy to produce counterfeit shares. Whereas online trading makes it impossible to distribute counterfeit shares. The online medium also makes theft a very rare event, and this is all thanks to Demat accounts.
Reason 3: Cost-Effective
Opening a Demat account and investing online is more cost-effective than traditional trading. When you open a Demat account, you only have to pay an account opening fee and an annual account maintenance fee. Stockbrokers, like Kotak Securities, let you open a Demat account for free. The brokerage charged by an online broker is also quite reasonable. Traditional stockbrokers charged heavy fees, due to which the common person found it expensive to invest in the stock market.
Reason 4: Made Mandatory by SEBI
And Lastly, the Securities and Exchanges Board of India (Sebi) has made it mandatory for investors to open a Demat account to invest in shares. This is due to the fact that the online mode of investing gets rid of a lot of flaws present in the traditional system. You no longer can trade physical share certificates. You have to dematerialize share certificates in order to buy or sell them on the exchange, for which you need a Demat account.
How to Open a Demat Account?
Now, when it comes to how to open a Demat account with Kotak Securities, you can do it online as well as offline. To open one offline, you visit the nearest Kotak branch, whereas to open the account online, visit Kotak Securities’ official website. You have to fill out a form and submit documents like your PAN, Aadhaar card, passport, and photographs in both cases. Then, you need to complete the in-person verification. After the verification process is successful, you have successfully opened a Demat account with Kotak Securities. Then you can use the Demat apps offered by Kotak Securities to start investing in the stock market.