Top 7 Secret Benefits of Holding a Demat Account
The Demat account is THE account one needs, to start their investing journey in the stock market. Think of it as the glorious gateway to the Indian financial market. With the help of a demat trading account, the stock market with its various trading platforms, can easily be accessed electronically. The electronic process has also resulted in more transparency, thus eliminating the risks of fraud, forgery, loss etc.
But these are not the only benefits of having a Demat account. There are quite a few secret benefits that the demat account holds for its holder. Here, we will have a look at 7 of them.
The Secret Benefits
There are so many benefits that a Demat account provides to its holder, but here are 7 secret ones that not many investors might know about
Safety and Security
No method or holding provision has the same safety and security of financial assets as a Demat account offers. Before demat accounts, shares were traded in the form of paper certificates. This method was always at the risk of either theft or damage. If it came to needing duplicate certificates, the process too used to be extremely complicated.
The main job of the demat trading account is to hold all the securities a trader has invested in, in electronic form. This is what offers impenetrable security and safety to the demat account, keeping all the shares 100% safe. The chances of shares in electronic form getting lost or stolen are very low.
Easier Settlements
When securities were traded in the form of paper certificates, any kind of transaction or transfer would take at least a fortnight to be processed. This was because the paper certificates had to first be transferred from the buyer to the RTA, and then the RTA would transfer it to the buyer.
However, now, thanks to Demat accounts, this time of the buying and selling process has come down from 14 days to 2 days. Goes to show how having a Demat account can save both an investor’s time and energy.
Error Reduction
Before the introduction of the Demat account, the physical share certificates were prone to inviting a lot of errors because of the manual nature of the work. Now, with the electronic trading system in place, since computers are involved at every stage, the margin for errors to happen has gone down significantly.
Storage for Every Financial Asset
A Demat account does not just hold shares for an investor. Everything from bonds and debentures to mutual funds and the funds from exchange trades can all be housed in a Demat account. As a result of this “all under one roof” concept, it becomes easier for traders to track and monitor their investments.
Simple Management and Accounting
Having all the investments under one account helps investors manage all of them seamlessly; this includes all the financial records as well. Such records are crucial during tax filings and financial audits. This management would have been next to impossible if all the investments were scattered across different accounts.
Better Liquidity
The main purpose of investments is to be able to use them to access capital when in need. With the Demat account, investors can easily seek loans from banks by keeping their investments like stocks or mutual funds as collateral. This is not a provision that can be accessed with such ease without a demat account.
Easy Transmission
If, at any point, an investor passes away, the procedure of transferring all of their holdings to their nominee or legal heir is simple and hassle-free because of the demat account.
When an investor decides to open Demat account, they are asked who they’d like to add as a nominee to the account. This process, however, was anything but simple when shares were in the form of physical certificates as it required a lot of back and forth and plenty of paperwork as well.
Conclusion
Whereby, potential investors would already be aware of the basic benefits offered by the demat account, these secret benefits further emphasize why a Demat account is required for any new investor or trader.