How to use your Demat Account for trading?


The introduction of Demat Accounts has been a revolutionary move for the stock market in India. The whole purpose of electronic media and the internet is to make our lives easier. That is, what exactly has been the impact of Demat Accounts. The traditional process of trading in the share market was a tiresome one for sure. Moreover, there were a lot of risks involved in holding the physical certificates of shares and securities. You could possibly lose your share certificates, it could get forged or torn apart. Also, acquiring those certificates required you to travel to the broker and collect it.

You can open a Demat Account with minimal documentation through the online portal of your preferred Depository Participant. For more information, check IIFL’s Demat Account and its procedure of opening the account.

A Demat Account comes with a lot of facilities for safe and easy trading experience. Source: Pixabay

How Many Accounts You Need To Have?

A complete and successful trading process requires you to possess three accounts which must be interlinked with one another. They are:

Demat Account

This is the most important one among the three because you would not be able to hold your shares and securities electronically without it. Every time you purchase a share, bond, government security, or ETF (Exchange Traded Fund), etc., your Demat Account will be credited and its electronic certificate would appear in the statement of the account. Simultaneously, your linked personal bank account would be credited against the purchase you made. And in a similar manner, your bank account is credited and the Demat Account is debited every time you sell a share or security.

Personal Bank Account

Before you open a Demat Account, you need to open a personal savings account in any bank of your preference, if you do not have one already. The purpose of this account is to facilitate the monetary transactions involved in the trading process. Demat Accounts are only for holding shares electronically. Also, the service and maintenance fees charged by your depository Participant would be deducted from this account only.

Trading Account

A trading account is a host of investment possibilities. It is not confined to the stock market. You can use your trading account for commodities, currencies, gold and ETFs, bonds, etc. For the purpose of trading, you need to link your Demat Account with this account. It is used for selling shares in securities in BSE (Bombay Stock Exchange), the NSE (National Stock Exchange), Multi-Commodity Exchange, Derivatives Exchange, and National Commodity. You can easily open a trading account through the online portals of Depository Participants.

Uses Of A Demat Account For Trading

For a successful trading process in the stock market, you need to connect three accounts which would help you in getting your job done. The major part is played by the Demat Account that is the electronic storage of all your shares and securities. With the help of it you can:

Trade In Securities And Shares - The main purpose of a Demat Account is to help you in trading in the stock market by electronically storing all the shares and security certificates. These electronic forms serve the same as the physical ones, just in a better and hassle-free way. Your Depository Participant will help you in maintaining the account and monitor all its transactions. This will enable you to perform more productively in the stock market as there is no stress of going through the cumbersome procedure of buying share certificates physically and safely storing them.

Dematerialise / Rematerialise Your Shareholdings - Dematerialisation is the process of converting physical shares into electronic forms. This is done with the help of a Demat Account. If you have certificates of your previously bought shares or bonds, you can dematerialise them through your Demat Account. All of those will reflect in the statement of your holdings. Similarly, if you wish to rematerialise any of your electronically stored shares, it can be done with the help of the same.

Track Portfolio Performance - A better analysis is possible only with a well-maintained track record. With a Demat Account, you can track your investment portfolio easily at a glance. The renowned Depository Participants not only store your shares electronically but also keep a record of that in an organised way. You can have a look at it whenever the need be. Moreover, the live market data can also be monitored with the help of these accounts.

Review All Your Securities On A Single Dashboard - Almost all your stock market investments can be reviewed and maintained through one account. A Demat Account holds shares, bonds, government securities, ETFs, etc. all in one. So, there is no need to maintain separate files. It saves you time and effort which you can use in doing something more productive.

Get Market Alerts - There are few Depository Participants who offer the facility of setting market alerts. This helps you in setting a specified price at which you wish to buy or sell your shares and securities. This then helps you plan investments better and more efficiently. In this manner, you can focus on your productivity and keep an eye on the stock market to make the best out of your investments.

Avail Loan - As it is known, shares and securities are taken as an asset of a person. There was a time when people used to submit their share certificates to avail loans. With your Demat Account, you can do the same thing in an easier way. You can pledge the securities held in your account for availing loans from banks.

Freeze Your Account - Some of the Depository Participants offer the facility of freezing the Demat Account for a predefined period of time. You can avail this offer when you feel to hold your securities for some time and do not make any transactions. However, the financial institutions set a limit for this. That is, you need to have a specified amount of holdings for availing this option.

There are plenty of facilities that you can avail through your Demat Account for trading in the stock market. All you need to do is choose the right Depository Participant for providing you the services conveniently.

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