Demat Account also known as dematerialised account is a account which is used to hold shares and securities in electronic format. Main purpose of opening a demat account is for holding shares which have been bought or dematerialised ( Shares which have been converted from physical to electronic shares) which makes easy for the trader to trade online.
Depositories such as NSDL and CDSL provide free demat account services, depositories participants or stockbrokers such as Zerodha, Upstox ,Groww and other stock brokers provide these services.
Demat account provides provides the option to hold the shares and securities in e-format. The shares and securities which have been traded online will be held in Demat Account. Demat account will have all the investments an individual makes in shares, bonds, mutual funds all in one place.
What is Dematerialisation?
Dematerialisation is a process of converting physical share certificates in to electronic form, which makes it easier to maintain and accessible from anywhere in the world. Main purpose of dematerialisation is to eliminate the need of holding an physical share certificate and facilitate seamless tracking and monitor the holdings of an investor.
Importance for holding an Demat Account
Demat account provides digitally secure and convenient way for monitoring shares and securities invested by an individual. Once an trade is performed by an individual and approved the shares or securities will be digitally transferred to your account. Holding an Demat Account makes one trade on the go by using smartphone or desktop, which makes once work easy to trade instead of visiting a stock exchange for transacting.
How does a Demat Account Work?
The process of trading through a demat account is similar process of physical trading, expect demat account is electronic. You can begin to trade by placing an order through online trading account. For trading through an demat account it is necessary to link both trading and demat account. Once an order is placed stock exchange will process the order.
Demat account will verify the share price and availability of the shares before the order is processed finally. Once the final processing of the order is completed the shares will start to reflect in your demat account statement of holdings.