Just like the concept of internet banking, the process of dematerialization has made stock trading transactions simpler and easier than before. Find out the pros and cons of having a Demat account.
There are a number of advantages and disadvantages of a Demat account but everything depends upon the adaptation of investors with respect to the influencing factors. As a stock trader or investor, you may like to gain a fair understanding of the pros and cons associated with your Demat account as well.
Pros of Demat Account
The following is a list of certain pros associated with a demat account:
- The most essential advantage of a Demat account is that you can rest assured that your share certificates are safely held with a reliable agency. Gone are the days when you had to safeguard those certificates from being lost due to theft, fire, or other calamities.
- With your Demat account, you can transfer the shares easily and quickly. All that you need to do is contact your broker and provide suitable information pertaining to the transfer.
- You can buy and sell in odd lots (even one share) with the help of your Demat account. This was not possible earlier on.
- Now, you need not wait for your bonus shares to arrive at your address. With a Demat account, you can instantly see the bonus shares issued by the respective companies that you may have invested in.
- In case of any address change, you just need to inform your DPs and they will update your Demat account accordingly. There is no need to contact each company for requesting a change of address.
- You can hold mutual funds, bonds or even gold ETFs with your Demat account.
- No stamp duty is required on share transfers, thereby reducing the overall cost of transactions.
Cons of Demat Account
There are a few cons associated with holding a Demat account as well; these are:.
- Demat account holders are likely to be subjected to internet frauds if they are not tech savvy. Due to their lesser technological knowledge, most investors have to depend on their parties that may defy their trust.
- A Demat account is not free of cost as the broker would invariably charge a maintenance fees on a yearly basis. These fees would however vary from one broker to the other.
- If you have a Demat account, the maintenance and other associated charges would be levied even if a single share is held by you. In most cases, investors do not pay heed to the formalities attached with the closure of their accounts if they do not intend working with the same. As a result of this, their account dies becomes dormant, but at the end, they will have to clear all the dues along with interest.
Investors, be careful while handling your Demat account. Your trading skills and experiences are the key towards transforming these cons into pros; go for it. Get ready to delve headlong into the world of stock trading with the knowledge of how Demat accounts work; and are beneficial too!