A demat account helps you to invest in the stock market by acting like a vault for the equity shares that you purchase. It can also be used to store other securities like corporate bonds, mutual funds, ETFs (Exchange Traded Funds), and government securities.
Why is opening a demat account essential?
A demat account holds your securities in dematerialised format. Therefore, it facilitates easy share transactions and allows you to monitor your holdings conveniently. Transferring shares from one demat account to another is easy. It is also possible to nominate your legal heir who can benefit from your investments after you.
How can a demat account help you create wealth?
It is mandatory to open a demat account to invest in market-linked financial instruments. By providing exposure to multiple asset classes like bonds, debentures, equities, commodities, currencies, etc. it provides you with numerous opportunities to create wealth.
You can learn how to invest and earn a profit through these instruments and achieve quick growth for your invested capital. Moreover, investing in diverse instruments helps you balance the risks associated with your investment portfolio.
Step-wise process to open a demat account online
Here are the steps that you can follow to know how to open a demat account online:
- Step 1: Choose a DP
Choose a DP (Depository Participant) who offers the kind of services you need to invest in the stock market. After that, you can visit their website and fill an online application form.
- Step 2: Enter a nominee
It is suggested that you enter the nominee details while filling the application form. Ensure that all the details you provide in the form are accurate as they will be compared with the information reflected in your documents.
- Step 3: Submit the documents
Documents that validate your identity, address, bank details, and income need to be submitted along with the application form. After submitting these documents, the DP arranges for an in-person verification round. Most DPs conduct an online verification through a video conference these days.
- Step 4: Sign the agreement
Once your documents are verified, the DP will request you to sign an agreement. You must go through all the terms and conditions mentioned in the document to avoid any confusion.
Also, the agreement contains the rights and duties of investors and DP in detail. Therefore, it is recommended that you sign these documents only after reading them thoroughly. It is possible to upload a digital signature these days. Also, you can upload your photo directly to speed-up the demat account opening process.
- Step 5: Save the BO ID
Upon completing all the above formalities, you will receive a 16-digit BO (Beneficiary Owner) ID on your registered email address. Save it as it is your demat account number that you will require to access your demat account in the future.
Factors to consider while selecting the best demat account in India
Here are some factors that you can consider while selecting the best demat account in India:
Ease of opening the account
Ensure that the DP with whom you open a demat account facilitates a seamless online account opening procedure. Most formalities from submitting the documents to filling out the application form and completing the verification round to uploading photographs and a digital signature can be done online these days.
A simple and user-friendly UI (User-Interface) enhances your overall trading and investing experience. Choose a broker who updates the trading platform consistently and introduces new features that enable you to trade seamlessly.
Account opening charges
A nominal account opening fee has to be paid while opening a demat account. However, many brokers don’t charge this fee as they want to attract more investors to their platform.
It is possible to minimise the brokerage and other demat charges by opting for the services of a discount broker. Discount brokers offer the necessary services to trade or invest online while charging a commission or brokerage on a flat-rate basis. They help you save more money as you pay a fixed brokerage irrespective of the trade volume. By minimising the brokerage, you stand a chance of earning higher returns through your investments.
Credibility of the broker
Confirming the credibility of the broker is necessary before opening a demat account. It is so because you don’t have to worry about the safety of your investments and issues related to demat account charges when you open a demat account with a reputed and trusted broker.
A product portfolio refers to all the products offered by the broker. Product portfolio evaluation provides you with a better view of a particular stock by providing details regarding its growth potential, key businesses of the company, market leadership, and risks. Therefore, it allows you to research equities thoroughly.