Demat Account: Let’s have a look at the advantages and disadvantages of having a Demat Account.
By the grace of technology, trading in stocks has become a walk in the park.
When it comes to taking the first and the most important step before you start your trading journey, the only thing that is advised to you is –
“Get a Demat account immediately!”
What is a Demat Account? – Demat Account Meaning
A Demat account is an account that digitally keeps an account of all your transactions in financial assets like shares, bonds, etc.
The term ‘Demat’ hails from the word Dematerialisation. It is ideally the process of converting a share certificate (paper format) to digital format.
Benefits of Demat Account
The most important benefit of a Demat account is that it can be accessed anytime from anywhere with your Laptop, PC, or Mobile Phone.
Not only this,
- The shares you buy will be easily delivered to your Demat account in just ‘t+1’ days after you buy them.
- There won’t be any risks that are associated with physical shares like loss of certificates, fake certificates, etc.
- With everything being done digitally, a lot of paperwork is completely eliminated.
Advantages of Demat Account
Now that you know, getting a Demat account comes with huge trading benefits, let’s discuss its advantages and disadvantages:
Why not the advantages first? Read below –
- One Account to Store Multiple Financial Assets
As mentioned earlier, you get one account to buy, sell and store all your financial assets such as debentures, bonds, exchange-traded funds, etc. As all the assets are available and recorded in one account, this makes the maintenance and tracking process easy.
- Safety of Shares
Earlier the physical dealings of financial assets led to numerous manual negligence. As a result of which, there was always a risk of loss or theft of the share certificates.
But now, holding shares in Demat form is safer and more secure with no chance of theft or loss of assets.
- Easy Management of Finance
The Demat account records all the financial transactions, thus making the management of accounts extremely simple.
- Easy Liquidation and Monetisation
Shares that are in physical form are very difficult to liquidate.
With the help of a Demat account, you can easily liquidate i.e. sell, or take a loan against shares, mutual funds (if you are holding these financial assets) in a dematerialised form.
Disadvantages of Demat Account
There are always two sides to a coin. With that being said, you must have already assumed what we are going to discuss in this section.
The disadvantages of creating a Demat account. Let’s go through them-
- Frequent Supervision of Stockbrokers
It’s obvious that you will not be aware of the stockbrokers handling your Demat account.
You may not know, but many brokers get involved in proprietary trading i.e. they become the counterparty to a client’s trade.
But, you can be carefree with Alice Blue. Here, you don’t have to worry about fraudulent or dishonest brokers. We ensure cent percent transparency with our clients.
- Regular Updation of Portfolio
With Demat accounts, shareholders/investors easily track shares online. This forces the habit of short-term trading.
This habit will let you miss out on the golden opportunities of carrying out long-run investments.
- Insane account opening and annual charges
Many stock broking companies charge absurdly while opening a Demat account followed by insane annual maintenance fees.
But, the situation is not the same everywhere.
At Alice Blue, you get to open your Demat account for FREE and the annual maintenance charge is ₹ 400/- per annum only.
Quite affordable, right?
Conclusion
Well, opening a Demat account comes with its own share of advantages and disadvantages, but you must not forget that greater investments come with greater risks.
So, before you start investing, go through the Pricing Plans by Alice Blue and get set for an exclusive financial journey.
Open your Free Demat Account today!
