Demat Account Online: Benefits and Risks
Tags: finance
Published: 2023-04-04 15:00:36

Before the introduction of Demat accounts, people used to wait for long hours to buy shares and they had to maintain physical share certificates. However, with the introduction of the Demat account in 1996 changed the overall landscape of investments.  Opening a demat account provides access to various financial instruments such as mutual funds, stocks, bonds, etc. In this article, we are going to learn about Demat accounts, benefits and risks of opening a Demat account.

**What is a Demat account?**
A demat account allows you to store securities like mutual funds, ETFs, stocks, commodities, currencies, etc in electronic form. Since all the securities are held in one account, it becomes easy to track and monitor your investments. In other words, your bought securities are stored in a dematerialized form. In case you have  physical share certificates, you can convert them into dematerialized form and store them in your Demat account.

 

Investors who are just starting out can take help from various resources available which help to make informed decisions before buying any security. For example, if you are planning to invest in a mutual fund via SIP, you can use a [mutual fund sip calculator ](https://www.5paisa.com/calculators/sip-calculator)to calculate the estimated returns.

**Benefits of a Demat account**

- [Demat account online](https://www.5paisa.com/demat-account) removes the hassle of managing share certificates and risks of misplacing or theft.
- The trade you take place from your Demat account gets settled in T plus 1 working day. Hence, it makes transactions faster and more efficient, as well as reducing costs associated with paper-based processes.
- The main benefit of having a demat account online is that it eliminates the need for physical paperwork.
- You can monitor your investments in real-time and make informed decisions about when to buy or sell stocks.
- Having a demat account online is that it provides a secure platform for your investments. All transactions are encrypted and stored in a secure server, which ensures the safety of your funds.
- You can easily sell your securities during the market hour. Hence, it provides liquidity.
- You can get loan benefits against your financial securities.

**Risk associated with opening a Demat account**
- - Cost: When you open a Demat account there are certain costs associated with it such as Account opening charges, annual maintenance charges and custodian charges.
- - Technology Savvy: Many senior citizens are not acquainted with the technology and since, investing in securities can be done through Demat account. So, If you are not tech-savvy, you need to learn operating Demat accounts.
- - Frequent share trading: Investors can trade in securities from anywhere. However, it can also inculcate the habit of short term trading to earn quick profits, which can lead to huge losses if not done with the right strategy.

**Conclusion**
Having a demat account online can make managing your investments easier and more efficient, while also providing a secure platform for your funds. If you are considering opening an online demat account, it is important to do your research and understand the risks involved before making any decisions. Also, it is important to understand the risks associated with having an online demat account.