Lets Know About DEMAT ACCOUNT - Part 1

Hello Friends here we come up with our another write up on “SMC Gyan Series”. .

Lets Know About DEMAT ACCOUNT - Part 1

. Topic is DEMAT ACCOUNT – Know how it really works ! . In this First part of Blog, we would try to discuss about the importance of Demat account and would like to share the fact that why demat account is must. . With growing financial awareness, more and more people now want to dabble in the share market. To do this, one should understand the basic requirements to trade in shares.

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A company enlisted in a stock exchange, is under obligation to offer the securities in both physical and dematerialized mode.

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Physical securities mean actual certificates giving information about the shares of a company owned by a person.

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In the same manner, Dematerialization is the process of converting physical shares (share certificates) into an electronic form.

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Shares once converted into dematerialized form are held in a Demat account. Today, almost all of the shares trading happens using the Demat mode of shares.

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What is a Demat account? . Demat account allows you to buy, sell and transact shares without the endless paperwork and delays. It is also safe, secure and convenient. . Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, you need to open a demat account if you want to buy or sell stocks. . So it is just like a bank account where actual money is replaced by shares.

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You have to approach the DPs (remember, they are like bank branches), to open your demat account.

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Let’s say your portfolio has 100 of Satyam, 200 of IBM and 120 of TCS shares. All these will show in your demat account.

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So you don’t have to possess any physical certificates showing that you own these shares. They are all held electronically in your account.

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As you buy and sell the shares, they are adjusted in your account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions. . Is a Demat account must? . Nowadays, practically all trades have to be settled in dematerialized form.

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Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more.

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So a demat account is a must for trading and investing. It is a safe and convenient means of holding securities just like a bank account is for funds.

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Next Blog we would try to touch upon the aspects like why demat account as well as features and benefits of Demat account.

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Stay Tuned for more and more on this

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