Unlock Stock Market Success: Benefits of a Demat Account and Step-by-Step Guide to Open an Account

Gold and Fixed Deposits (FDs) seem to be safe investment options. However, if you don’t invest in the stock market, you could be missing out on 200% returns. Over the last 6 months, various stocks and indices have produced returns ranging from 14% to 277%.

Recently, people have started to realize the potential of the stock market. The number of Demat accounts has increased exponentially from 39 lakhs in FY 2013-2014 to 399 Lakhks in FY 2023-24. The infographic below shows the increase in the number of demat accounts in the last 10 years. However, only about 3% of Indians participate in the stock market.

There are many reasons to open a demat account. If the growing number of Demat accounts and the potential returns don’t convince you, there is another fact that might convince you!

Did you know that FDs and endowment plans essentially make you lose money? These instruments only generate around 4-6% returns. Given inflation, you could lose more ₹14 lakh with an investment of ₹50 lakh in 10 years!

That’s why you need a demat account today. to profit from the stock market and increase your wealth. Before opening a demat account, you need to know certain things like: B. What a demat account is and what benefits it offers.

However, with so many different options, it can be quite difficult to choose one. But don’t worry! At Finology Select you will find the top brokers with their features, benefits, comparisons and everything else you need to make the right choice.

What is a Demat Account?

It is short for “dematerialized account”. Think of it as a digital bank account for your investments. You need one to buy/sell stocks. Just like a bank account keeps your money safe, a demat account keeps your stocks and securities safe in digital format.

Originally, shares were held in the form of physical certificates that were vulnerable to loss, damage or theft. A demat account turned out to be the solution to these problems.

Now, if you want to open a Demat account, you need to contact a Depository Participant (DP). This can be a bank, a financial institution (FI) or a stock broker registered with depository institutions such as the National Securities Depository Limited (NSDL) or the Central Depository Services Limited (CDSL). It is similar to a middleman between you and the depository. When you buy or sell shares, the DP manages the process by crediting or debiting your demat account. It ensures that you retain ownership of your shares.

What are the benefits of a Demat account?

Opening a Demat account comes with numerous benefits:

1. Stock levels are stored electronically, eliminating the risk of loss or damage.
2. Easily track and manage investments via online platforms or mobile applications.
3. Transactions are settled within T+2 business days (two days after the trade date). Faster transactions mean more liquidity.
4. Investors can name beneficiaries for their investments. This means easy transfer of assets in the event of unforeseen circumstances.
5. Securities held in a demat account can be pledged as security for loans.
6. Dividend income is automatically credited to the investor’s account.

FDs can earn an interest rate ranging from 3.50% to 7.80%. However, in 2023, the Nifty 50 returned 20% and the Sensex returned over 18%. Without a Demat account, you will be sitting on meager returns and will never be able to create wealth.

How to open a demat account?

Here is a simple step-by-step guide on how to open a demat account:

1. Choose a broker: You can consider various brokers that offer demat account services. On Finology Select you can find reliable brokers like Groww, Zerodha, Angel One and 22 others.

2. Select the account type: There are two types of demat accounts:

1. Regular account: Offers a diverse range of services such as: B. Trading and investing in various securities such as stocks, bonds and mutual funds.
2. Basic service account: A limited range of services suitable for the management of debt and government securities.

3. Submitting the document: Required documents typically include:

• Account opening form: Collects basic personal information, contact details and preferences
• Permanent Account Number (PAN) Card: A copy of PAN card for KYC (Know Your Customer) verification.
• Proof of identity: For example, an Aadhaar card, passport, voter ID card or driving license
• Proof of address: Can be verified using Aadhaar card, passport, utility bills or bank statements
• Passport photos: Generally, a digital copy of the current photo is required
• Bank account proof: A canceled check or bank statement to link the demat account with the investor’s bank account

4. KYC Verification: The DP carries out this step and thus ensures compliance with regulatory requirements

5. Personal Verification: This can be done via video call or by visiting the DP’s office

6. Signing of the contract: An agreement or consent form setting out the terms and conditions of the demat account and services provided by the DP

7. Account activation: The DP provides a unique demat account number (similar to a bank account number) and other relevant account details

8. Start Trading and/or Investing: Buy, sell, hold and manage investments electronically through a trading platform

The process of opening an account with Demat may vary from broker to broker. Finology Select provides detailed instructions on how to open a demat account with 20+ brokers with pictures, simplifying the entire process.

Top 10 Demat Accounts in India

Here is a list of some of the most famous brokers in India:

Compare their different offers, features and fees with those of 15 other brokers on Finology Select! But what do you do if you have already decided on a broker and want to change? Well, you can easily switch brokers!

How do I transfer shares from one demat account to another?

There are several reasons to transfer shares from one demat account to another. You may want to switch to a broker that offers better services or lower fees, or simply transfer your shares to a family member’s account. This can be done in two ways:

Offline method

Step 1: Ask your current broker for a Delivery Instruction Slip (DIS), this contains all the necessary details for the transfer.

Step 2: Enter the following details:

1. International Securities Identification Number (ISIN)
2. Number of shares
3. Target client ID
4. Choose the over-the-counter transfer mode or the option between depots

Step 3: Sign the document and give it to your current broker.

Step 4: Investors may be required to pay a transfer fee.

Step 4: Collect the confirmation slip.

Consequently, the shares will be transferred within 3-5 days.

Online method

Step 1: Visit the CDSL or NSDL website and sign up for the “Easiest” or “Speed-e” feature.

Step 2: Fill out all required details and submit the form.

Step 3: Give a copy of the form to your DP who will then send it to the central depository.

Step 4: The relevant authorities will check your details and you will receive your login details within 1 to 2 days.

Now you can transfer holdings from your demat account at any time.

Diploma

Nearly 3.10 crore new demat accounts were opened in 2023 and 3.18 crore in 2024. Having a demat account has become a necessity for wealth creation. Without a demat account, you cannot invest in the stock market or earn high returns.

More and more investors are realizing how important a Demat account is to their investment strategy. Financial markets are now almost entirely digital, and in this scenario, a reliable platform to find broker information can improve your investment experience.

Opening a demat account can be a complex process, but it doesn’t have to be difficult. With the right guide, like Finology Select, this is child’s play.

Disclaimer: This article is sponsored content. The submissions and details discussed in the article do not necessarily reflect the views of Mint and Mint does not endorse or assume responsibility for the information provided. Investing in the stock markets involves financial risks. Before investing, seek advice from an expert.