Investing in the stock market involves a series of processes ranging from basic preparations to generating profits. Understanding how to store one’s shares is, therefore, a crucial aspect of demat account opening. This technological development facilitates the storage of shares in dematerialised form.
Although demat accountopening might seem a complicated procedure to a novice investor, it helps to know what lies ahead. Let us then look at some basics of a demat account, starting with its definition, followed by a step-by-step procedure, right from choosing a Depository Participant (DP) to learning how this account assists in retaining one’s hard-earned income.
What Is a Demat Account?
As stated above, a demat account is used to hold financial instruments like shares, Exchange Traded Funds (ETFs), bonds, and other securities in dematerialised, i.e., electronic form. Previously, shares were held in the form of actual paper certificates, and hence the risks of losing, damaging, or misplacing them were very high.
Hence, a dematerialised account is a necessity for investors as it offers a safe way to hold on to one’s shares. It is important to note that a demat account is meant for holding on to one’s shares or other instruments; it does not hold any cash. To buy or sell shares, one needs to link a demat account to a trading account. Now that we know what a demat account is, let us understand how to open one.
Step 1: Select a Depository Participant
First and foremost, the step towards demat account opening is choosing a DP. There are several banks, financial institutions, and stock brokers who act as DPs, i.e., intermediaries between investors and the depository. Here, it is important to know that there are two depositories, namely, National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).
Before choosing a DP, it helps to learn about the various factors like maintenance charges on the demat account and other applicable fees and commissions to get a clear idea about the features of the service provider.
Step 2: Apply for the Account
The next step involves applying for the demat account with the chosen DP. Most DPs provide the facility to open demat account online, which eliminates the need for any physical paperwork. To apply for an Angel One demat account opening, follow the application procedure provided here.
- One usually needs to provide their basic personal details and email address while filling out the application form.
- They are then sent a One-Time Password (OTP) to the phone numbers registered with them to verify their mobile number.
- Thereafter, they are required to submit their PAN number and address for verification.
- The next step involves providing the DP with one’s bank details to link the bank account with the newly opened demat account.
- Finally, the applicant signs up using a digital signature.
It is important to have relevant documents and details at one’s fingertips while applying for an account, as verification is necessary for activating a demat account.
Step 3: Get Account Login Details
Soon after successful submission of the application form, the applicant receives the account number, together with the login credentials for the chosen depository. The dematerialised account provides a unique ID to each account holder upon opening their account with the DP. The account holders are advised to keep the login details, including the passwords and OTPs, safe and not share them with anybody.
It is also a good idea for the account holders to go through the terms and conditions of the demat account, including the applicable charges, carefully. In this way, they can stay updated on aspects of their demat account.
Step 4: Start Holding Securities
The fourth step entails actually putting money into the newly opened accounts. This is done by the account holder either by depositing the money into the bank account linked to the demat account. Thereafter, the account holder is able to view the securities that they hold in dematerialised form on their demat account login page.
It must be noted that although investors have the option of holding their shares and other instruments in electronic form, the market value of these securities keeps fluctuating.
Step 5: Track Your Investments
Although one does not physically hold paper instruments in a demat account, one needs to ensure that they update their contact details with the provider of the demat account in case of any change. Moreover, it is imperative to understand the costs involved in opening a demat account and any potential purchase or sale of instruments.
Conclusion
Opening a demat account is, indeed, an exciting experience for any novice investor. However, it is always important know the procedure towards demat account opening and how one can utilise this facility while navigating the market. If you follow the above step-by-step plan, you can start investing in stocks and other things with ease and trust.
