Investing in stocks and other securities can be a great way to grow your wealth over time. However, before you can dive into the world of investing, you need to open a Demat account. Don’t worry if you don’t know what a Demat account is or how to open one – this beginner’s guide will explain everything you need to know.
What is a Demat account?
If you are planning to invest in the Indian stock market, you need to know what is demat account. A Demat account is an electronic account that holds your shares and other securities in a digital format. This means you no longer need to hold physical share certificates, which reduces the risk of theft, loss, or damage. Anyone wanting to purchase or sell securities in India must have a Demat account, according to the Stocks and Exchange Board of India (SEBI).
How to open a Demat account online
Opening a Demat account online is easy and convenient. The steps you must take are listed below:
Step 1: Choose a Depository Participant (DP)
A Depository Participant is a registered agent of a depository who provides Demat account services. National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) are the two depositories in India. Choose a DP with an NSDL or CDSL registration.
Step 2: Fill out the Application Form
Visit the DP’s website and fill in the online application form for opening a Demat account. You will need to provide your details such as name, address, PAN card number, and bank account details.
Step 3: Submit Documents
Upload scanned copies of your documents including your PAN card, Aadhaar card, and bank statement. These documents are necessary to prove your identity and address.
Step 4: Verification
Your application will be processed by the DP, and you will receive an email with the account details and instructions on how to operate the account.
This entire procedure for opening demat account online is very secure and convenient.
In India, there are three different types of Demat accounts:
1. Regular Demat account: This type of account is ideal for investors who carry out transactions occasionally. It has no specific deposit or balance requirements, and the maintenance charges are moderate.
2. Basic service Demat account (BSDA): This type of account is suitable for small investors who have a portfolio of up to Rs. 50,000. The maintenance charges for this account are lower than that of a regular Demat account.
3. Repatriable and non-repatriable Demat account: A repatriable Demat account is used by NRIs who want to transfer funds/assets held in India to their foreign bank accounts. A non-repatriable Demat account is for NRIs who do not intend to repatriate their funds. The funds/assets held in this account can be used to invest in India only.
Free trading account
Once you have opened a Demat account, you will need a trading account to start investing in securities. A trading account is where you place buy and sell orders for stocks, mutual funds, or other securities. Many DPs offer a free trading account to their Demat account holders, so make sure you check with them.
Opening a trading account
The process of opening a trading account is similar to that of opening a Demat account. You need to choose a broker who is registered with SEBI, fill in the application form, submit the required documents, and verify your account.
Choosing a Broker
Choosing a broker is an important step in the investing process. Make sure you conduct thorough research before zeroing down on a broker. Check their brokerage charges, customer support, research reports, and trading platform. Some of the popular brokers in India are Zerodha, Upstox, Angel Broking, and 5Paisa.
To open a trading account, you need to submit the following documents:
• PAN card
• Aadhaar card
• Bank statement or canceled cheque
• Passport size photograph
Once you have submitted the application and documents, the broker will verify your application. This can take a few days. Once your account is verified, you will receive an email with the account details and instructions on how to operate the account.
In conclusion, opening a Demat account and trading account in India is a simple process. With more and more people investing in securities, it is important to have a Demat account as it is mandatory. As a beginner, you can opt for a free trading account with your DP and choose a broker who suits your preferences. With Demat and trading accounts, you can start investing in stocks, mutual funds, and other securities that will help you create wealth over time.