Demat is short for ‘Dematerialised’. A Demat account acts as a digitised storage of your securities. There are various depositories in India that manage Demat accounts. Since the turn of the century, India has seen multiple bull runs, which have helped make Demat accounts popular among investors.
They are easy to use and allow investors to access stocks, Mutual Funds, ETFs, bonds, IPOs and much more. In short, a Demat account is the discerning investor’s Disneyland simply because of the sheer number of financial options available to play around with.
Here are five reasons why you should open a Demat account:
To trade in equities
You can no longer buy and sell equities in paper form. Since 2014, the SEBI has made it mandatory for investors to buy and sell stocks in digitised form. Stocks earlier held in paper form also need to be digitised.
Dematerialised equities first appeared in India in 1996, but it has taken nearly two decades for Demat trading to become law. Therefore, if you are a new equity investor, you will need to open a Demat trading account.
Invest in a variety of securities
A Demat account opens you up for investments in a large range of securities. You can invest in equities, Mutual Funds of all types and from all AMCs (Asset Management Companies), gold-related financial instruments, insurance, bonds offered by government and private entities, IPOs and Fixed Deposits.
You can also trade in futures and options (also known as derivatives). Note that you don’t need a Demat account to invest in Mutual Funds. However, having one makes it easier for you to access the entire Mutual Funds marketplace from one trading platform.
Track your portfolio performance
A Demat account consolidates your investments into an easy-to-follow dashboard. From there, you can track their performances across asset classes. This will help you make informed decisions about allocations, redemptions and portfolio balancing.
You can also track your cash balance through your Demat account. Overall, a comprehensive view of your investments provided by a Demat account helps you take smarter investing decisions.
Get technical analysis, charts, advisory
A data-rich Demat account can help you access not just live market data, but also make in-depth analysis of your investments.
For example, it may provide you with a chart showing investments as per market capitalisation, and it may show you that you need to invest more in large cap equity options and reduce your holdings in small cap equity. A Demat account may also provide you with investment advice with regards to when to buy, hold or sell.
Follow market news
One of the biggest problems with investing is that investors tend to lose track of important events (such as announcements by companies in which they hold stock), which may impact their investment. Information-rich Demat accounts help you track news and announcements from companies you are invested in.
When you invest in a stock, you get messages about dividend declaration, quarterly and annual results, important events like share buyback, mergers, lawsuits etc. This information is curated into your account in a manner that you may find useful.
Apart from this, you can also see analysts’ report on a company’s performance, its projection of revenue and profit and comprehensive analysis of historical performance. These reports are a goldmine of information and can help you spot investment opportunities.
For a busy person, it may not be possible to track stock movements at all times. Therefore, Demat accounts allow you to set alerts and also set instructions to automatically buy or sell stocks at specified prices.
To do this, you can visit your bank branch, inquire about their Demat facilities, and open an account by supplying your KYC documents and account-opening fees. Simple, isn’t it?