5 Basics You Should Know Before Investing From Demat Account

Before investing from a Demat Account, it is important to know what it is and the various other factors which influence how your overall investment experience is going to be. Here are the five things to know about before investing from a Demat Account.

What Is a Demat Account?

The first thing you should try to understand briefly is the basic definition of what is the Demat Account. The definition will specify the purpose of the Demat Account.

A Demat Account refers to a digital account where an investor can save his equities, bonds, mutual fund units etc in an electronic format. A Demat Account is quite similar to a bank account with the only exception that while a bank account keeps your money, a Demat account stores your stocks.

Instead of using physical share certificates, Demat Account uses a digital technology which converts the physical shares into an electronic format. It is the process of converting physical shares into an electronic form which is called dematerialization. By dematerializing your equities, you can keep them safe and transact in a better and faster way.

Once you have figured out the basics of what is Demat Account, the next important thing is to keep in mind certain things which can help you decide which DP you should go for.

Charges Of Opening A Demat Account

Demat Account involves a number of one-time, monthly and yearly charges. Comparing them with different DPs will give you some idea regarding which depository option to go for. However, there are some charges which are common in all the depositories. They are as follows:

Account Opening Charge

Account opening charge refers to the amount you have to pay for opening the account. Earlier, almost all the DPs would charge this amount. But opening a Demat Account involves no cost these days. So if your DP is asking an account opening charge, look for better options.

Annual Maintenance Charge

Annual Maintenance Charge or AMC is the amount you have to pay annually to the DP. The DP charges this amount in return for the services he offers you. There are DP’s who offer waivers on AMC for the first year of a new Demat Account.

Dematerialization And Rematerialization Charges

If you convert your shares from physical format to the digital one you will have to pay the dematerialization charges. Some DPs charge on the basis of the total value of the investor’s shares while others charge on per unit conversion of the shares.

Rematerialization is the reverse process of dematerialization. Here, you reconvert the digital shares back into their physical format. For this, too, charges are levied.

Custodian Fee

Some depositories charge a one-time custodian fee from the investors for opening their Demat Account. If they do not, then the DP’s charge the custodian fee on the monthly basis.

Postal Charges

Postal charges refer to the expenses incurred for transferring important documents of investment from one place to another.

Apart from knowing what is Demat Account, how much one will cost you is also important. It is quite evident that you should go to the depository which offers you zero account opening charges as well as waivers on AMC.

Types Of Demat Account

There are three types of Demat Account

  • Regular Demat Account: This account is for investors who are the residents of India.
  • Repatriable Demat Account: NRIs can also have a Demat Account through this option.
  • Non-repatriable Demat Account: The only way in which the non-repatriable Demat Account differs from the repatriable Demat Account is that in the former you can not transfer your shares outside India while in the latter you can easily do it.

Software Performance

The answer to what is Demat Account stands the same for all the investors. Whereas, in reality, their software quality and performance distinguishes them from one another. You should always go for a depository offering a software facility which must stand its ground on these factors:

  • The software application should not be lagging.
  • A simple User Interface.
  • It should provide all the necessary functionalities.
  • It should be compatible in all the operating systems on the phone, tablet or computer.
  • Compatible and accessible software is an integral part of a Demat Account.

    There is no point in getting a software application which keeps hanging all the time by showing connectivity issues and other such problems. If Demat Account has made the process of investing faster, the software should not make it take a step back.

    Customer Support

    Trading and investing can be complex to many beginners and even for the professionals at times. The need to get an understanding of the technicalities of investing can surface at any moment. Having good customer support can help the investor a lot. It should be accessible and cooperative. Reaching out to them should also not be a problem as they must be available 24x7 to solve any of your queries from the simple question of what is Demat Account to the more complex software issues you are facing.

    Make sure that you have chosen a DP who ensures these customer support benefits before you invest from a Demat Account.

    These are the 5 things an investor or a potential investor must keep in mind before opening or investing from a Demat Account. Once you know what is Demat Account and what benefits you can reap from it, your investment process will consequently get enhanced.

Source : NewsOnFloor

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