Using a Demat Account in India? Know These 5 Things Before Trading

Vishal Pathak, Content Writer | Thursday, 20 June 2024, 12:33 IST

Using a Demat Account in India? Know These 5 Things Before Trading In FY24, a total of 3.7 crore new demat accounts were opened, with an average of 30 lakh new accounts every month, which is the highest number of new accounts opened in the history of Indian financial markets. Using demat accounts you can easily buy and sell securities online without any physical documentation.

In this article, we will cover five things you need to know about demat accounts before trading.

What is a Demat account?

A Demat account manages all your shares and securities in the digital format without any paperwork involved. It is similar to a bank account but the only difference is that here all assets are available in digital form only whereas banks offer both.

You can open a demat account with NSDL (National Securities Depository Limited) or CDSL (Central Depository Services (India) Limited), as these are the two depositories registered with SEBI in India. This entity manages shares, bonds, mutual funds, government securities, and other investments in digital form in India. Through a Demat account, investors can easily manage their diverse investment portfolios.

You can now open an account via a demat account trading app instantly!

5 Things to Know about Demat Accounts in India

Before you start using a demat account there are certain things that you must be aware of. In this blog, we will discuss 5 things that you should know before using a demat account.

1. Multiple Demat Accounts

A user can open multiple Demat accounts through a single PAN card as there is no limitation on the number of Demat accounts through a single PAN card. If you have multiple Demat accounts, all will be linked to the same PAN card, and SEBI can review all your transactions at any point in time.

An investor can open multiple demat accounts with different DPs to carry various trades in the different assets and securities. Through multiple accounts, they can also use different strategies for each account.

2. Choosing the Right Demat Account App

Choosing the right demat account app is important to ensure that investors have a safe and secure trading experience. While selecting a trading platform you should consider factors like user interface, reliability, security features, fee structure, and customer services, etc. as these factors play an important role in trading.

3. Know the Charges Involved

Demat accounts make your investment journey convenient, but for opening and holding them investors have to pay certain charges. These charges include account opening fees, transaction fees, AMC, and all other miscellaneous charges.

It is important to be aware of these costs associated with a demat account trading app or platform so you don't get surprised at the end. Compare fees across different platforms and choose one that offers competitive rates without compromising on service quality.

4. Stay Informed About Market Risks

Investment in securities is subject to certain risks such as market volatility, economic risk, risk associated with companies, and risk due to changes in regulations. So investors need to be aware of trends in the market and they should do their proper research before investing.

To avoid risks they can also diversify their investments so as to be less affected by market volatility.

5. Ensure Compliance with Regulations

Before trading through a demat account, investors must ensure that the platform complies with regulatory requirements set by the Securities and Exchange Board of India (SEBI). These regulations include Know Your Customer (KYC) norms, guidelines for Anti-Money Laundering(AML), and regulations against insider trading.

By verifying these regulations, investors can not only protect their investments from legal penalties but also ensure their funds are protected.

To wrap Up

Demat accounts have changed the world of investing in India, by making it digital and more transparent. Now more people are tempted to invest in the stock market because of the transparency, security, and smooth journey it offers.

But before beginning their investment journey through the Demat account the investor must be aware of above mentioned points. So, they can make informed decisions and maximize their trading potential. With the right knowledge and tools, investors can navigate the world of trading with confidence and achieve their financial goals.