A demat account serves as an electronic trading account that allows investors to buy and sell securities traded on the stock market. Available in the form of mobile applications in the 21st century, investors can download their trading app on their mobile devices to access their demat account to buy, sell, and hold their securities in a completely secure manner. Investors can invest in exchange-traded funds, shares, bonds, mutual funds, and various other types of securities through the use of their demat account. One can easily open demat account by finding a depository participant registered with NSDL or CDSL.
How does a demat account work?
Serving as an online trading account, a demat account acts as an online locker that stores shares and various other types of securities in an electronic format. The demat account offers easy access to various securities which are listed on the stock market. Investors can download a trading account on their smart devices, select the securities they wish to buy, and use their funds to invest in the selected securities. Investors and even traders can use their demat account to buy and sell securities for earning profits both in the short as well as long term. The following points can further explain the working of a demat account.
1. Securities purchase
Investors who wish to invest in different types of securities listed on the stock market can use their demat account to execute online trades. They can easily select securities, link their demat account with their personal bank account, and use the available funds for purchasing securities in a hassle-free manner. Moreover, the stock market investment process follows the T+2 settlement cycle where the securities or credited into the demat account of the investors within two days of investment.
2. Securities sale
Investors can even use their demat accounts to sell their investment securities. They can opt for various features like GTT orders and intra-day sales to sell their securities on the same day or in the future. Moreover, the proceeds/funds received from selling securities are directly deposited into their bank account.
3. Access to dividends, bonus shares
A demat account even allows investors to gain access to company dividends, bonus shares, right shares, and even stock splits without the need for claiming the same through documentation and other lengthy processes. All the corporate benefits are directly credited to the account of the investors.
4. Access to different types of securities
The demat account even offers access to different types of securities like shares, mutual funds, ETFs, commodities, etc. that are all listed on the stock market. Investors can select from an extensive range of securities and use their demat account to buy, sell, and even hold their investments for a long period with complete security.
Conclusion
Demat account serves as a convenient, secure, and efficient way of participating in the share market investment. Moreover, investors receive access to various tools and other functionalities like real-time portfolio management and access to financial reports through the use of their demat account. Investors can select from various types of demat accounts that affect their preferences and needs and start investing in securities using their available capital outlay.
