Demat is used as a short form of dematerialization. It means conversion of physical shares to electronic. If you want to hold your shares in an electronic way then a Demat account is a platform that allows you to do the same. Along with holding it, you can also trade on it. In simple words, it can also be said that this platform has provided an easy and convenient way of trading shares. It is just like a bank account but you will be holding shares in it instead of money. No matter, what type of securities you are dealing in, you can do trading of all such securities through a Demat Account. It costs less than a broker. Furthermore, if there will be any update in relation to securities that you are holding such as bonus issue, right issue, dividend, etc. You will be kept up to date regarding such details.
If you are holding your shares in a physical form I.e. in document form then there are the chances that such documents holding shares may get damaged or lost then your right over shares will also be lost. But in the case of a Demat account, no such issue shall be there as you will be holding your shares electronically. Furthermore, SEBI has also made it mandatory to hold shares in a Demat account. The risks associated with holding shares in physical form will be eliminated and also, every transaction of trading in shares will be reflected in your account as soon as you have completed a transaction.
Having a Demat account allows you to buy or sell shares at anytime you want. You won’t have to go for paper formalities to buy or sell shares. If you want to buy a share, you can buy it immediately and book profit on such share, you can sell it immediately. In short, you can make quick decisions. Earlier, buying and selling shares was a time-consuming process but now it has been made an easy process, by just tapping on the screen of your mobile, you can trade in shares.
Having a Demat account also provides you with the benefit of availing loan on your shares. Also, if you are not using your account, for the time being, you can freeze it. And when you will start to use it again, you can get your account to unfreeze.
It will also provide a statement of shares that you have traded in. You can check when did you buy or sell any shares. When you will buy a share, it will be credited to your account and money will be deducted from your wallet. And when you will sell a share, shares will be debited from your account and money will be added to your wallet. In other words, you will be able to track all of your transactions.
However, while opening a Demat account there is a set of instructions that you will have to follow. You can visit 5paisa and know about such instructions and open a Demat account.