What is a Demat Account- Benefits and Documents Required to Open it?

Compared to the yesteryears, more people are willing to invest their money in assets like stocks. And this number is growing at a rapid pace. It is primarily due to three main reasons. First and foremost, more people have gotten financially educated and have learned the benefits of investing. The other reason is that today, it has become very easy to invest in the stock market thanks to online share trading. Therefore, a Demat account is essential, and it plays a core role in facilitating online share trading. So now let us explore what is Demat account. 

What is a Demat Account?

A Demat account is similar to your bank account but for shares. Your Demat account stores your shares in the dematerialized or electronic format. When you purchase shares, the shares get deposited in your Demat account. Likewise, shares get withdrawn from your Demat account when you sell them. To trade or invest in shares online, you must have a Demat account. To open a Demat account, you need to approach a stockbroker. Once you open a Demat account, you can access the associated Demat apps to start trading.

Trading Before Demat Accounts 

To fully understand the benefits of Demat accounts, we first need to understand how the system functioned before Demat accounts were a thing. Traditionally, investing and trading activities were physically carried out. To invest, you would have to contact your broker, who would go to the stock exchange to conduct the transaction on your behalf. Then, the broker would receive physical share certificates and then deliver them to you. It could take the broker several days to deliver the shares to you.

This process was time-consuming and very expensive since brokers changed hefty fees. Not only that, but you had to maintain these certificates with utmost care since physical damage could make them redundant. And lastly, due to its physical nature, it was easy to produce and sell investors counterfeit shares.

Benefits of Demat Accounts 

Now let us look at how the Demat account has solved all the issues mentioned above.

The convenience of online trading: With a Demat account, you can invest or trade online using your mobile phone. You no longer have to depend on a broker to go to the exchange. Instead, you can invest in shares with a few clicks from multiple devices like your laptop, PC, and tablet.

Instant process: Due to the digital nature, your orders are instantly executed if the terms of your order are successfully met. You will then receive the share you purchased in the next two trading days.

Shares stay safe: With Demat accounts, you no longer need to hold physical share certificates. Since our shares are now stored electronically, they are damage-proof. Neither can they get lost or misplaced?

Less prone to frauds: The shares that get deposited into your Demat account directly from the exchange. No intermediary makes contact with your shares. It has helped in preventing fraud and thefts.

Low fees: It is true that you still need a broker to open a Demat account. However, the charges imposed by online brokers are very less than compared to physical brokers.

Documents Required to Open a Demat Account 

Now that you know what is Demat account, you may want to know the process to open a Demat account. First, you open a Demat account through a stockbroker registered as a depository participant. It means that the governing bodies recognize the broker as an authorized entity.

Kotak Securities is a recognized depository participant. To open a Demat account with Kotak Securities, you need to go to the Kotak Securities website and fill out the online form. Then, you need to submit digital copies of a few documents to verify your identity and residence. You need to submit the following documents.

PAN card

Proof of Identity: Either your Aadhaar, voter ID, passport, or driver’s license

Proof of Address: Either your passport, ration card, or electricity bill

Income Proof: Income tax slip or salary slip

Photograph.

Then you complete the in-person verification (IPV) online, and after the verification process, you will have a functional Demat account. You could also visit your nearest Kotak branch to open a Demat account offline. The offline process would also require the same documents.

So, if you are looking for Demat apps in India, then the Kotak Stock Trading app can suit you the best as per your needs and expectations.