You must have been aware of the fact that foreigners are more financially stable than Indians. Have you ever wondered why? What’s the thing that Indians are lacking behind? Well, it’s nothing but the side activities these foreign people are indulged in. They do not just rely on their regular incomes but also invest in the trading world as well.
Yes, trading and investing could be a great way of expanding the horizon of your income. But one should get into this big pool of investing only when you are well aware of the market and possess knowledge about the shares of different companies. If not done so, you could also be the one bearing great losses. Therefore, knowledge is must.
The situation is so bad that a high proportion of Indian population does not even know about the demat account. Yes, the basics of trading are also not clear to various people. So, let us just put our focus on the demat account only and gather all the information about the same including its dos and don’ts. Let’s begin!!

What is a demat account?

A Demat account short form of the Dematerialized account is an account that is meant to hold the financial securities ( both equity or debt) in an electronic form. In India, Demat accounts or dematerialized accounts are retained and controlled by two depository organisations, these are National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). A depository participant, such as a bank, behaves as an intermediary between the investor and the depository.
The Demat account number of the investor is quoted for all the transactions to enable electronic settlements of trades to take the place. Access to the Dematerialized account or the demat account compels an internet password and also a transaction password. Transfers or purchases of securities can then be instigated in a well manner. Purchases and sales of the securities on the Dematerialized account are made once the transactions are substantiated and finalized.

What is the objective of the demat system?

Well, now must be aware of the term demat account and should now possess the basic idea and information of the same. But, do you know why there is a need for a demat account? What is the motive of an account like demat? Let’s see why a demat account is an important aspect of the trading and investing world.
India approved the Demat account for the purpose of electronic storing, wherein shares and securities of the traders are represented, stored and maintained electronically, therefore eradicating and abolishing the troubles associated with paper shares, the paper shares were damn difficult to handle for both traders as well as the brokers.
After the introduction of the depository system by the Depository Act of 1996, the whole process of sales, purchases as well as transfers of shares have become considerably easier and most of the risks associated with paper certificates were mitigated and removed.
So, the demat account has seriously been a blessing for those who are investing and market enthusiasts. So, let's check out what things we should keep in mind before creating or opening a demat account.

What are some of the dos while opening a demat account?

Given below are the various points that are to be kept in mind and are required to be followed while opening a demat account:

1. The financial ecosystem of India is increasingly and strongly moving towards the technology-based services. The use of advanced technology and online platforms has made monitoring a very easy task. You are just required to Opt for internet-based services and monitor the demat account yourself only. It will keep you updated.
2. Then, you could Opt for the SMS service and then you will get all the alerts related to the demat account on your mobile phone itself.
3. While approving the DIS book, you are required to ensure that your account number/client ID as well as the serial numbers are pre-printed in each slip.
4. Just be careful while asserting the ISIN and the number of securities held. Ask your DP in case you come up with a doubt.
5. Strikeout all the blank spaces that are shown on the DIS slip to avoid any kind of altering after the submission.
6. Numerous people skip or forget to update details like change in the address and bank account details. You can inform your DP just after a change in address or bank account at the firstest.
7. There have been numerous cases of misuse of the Power of Attorney which have been observed in the past time. Discern the scope and importance properly before you are consenting the Power of Attorney.
8. Always remember one thing that the Power of Attorney is not necessary for the opening of the demat account.
9. There is a significant feature that is often ignored by investors, it is nothing but the option to freeze the demat account. If you are planning to not use the demat account for a long time in that case you could freeze it to avoid undesirable debits and credits.

What are some of the don'ts while opening a demat account?

1. The instruction book of your demat account can be misapplied, so, do not leave it with anyone else who you do not trust.
2. The DIS slip is required to be filled with maximum care. Don’t misspell, cancel or overwrite the number of shares on the DIS slip. Otherwise it would not be accepted.
3. One of the biggest advantages of electronic trading and the demat account is the trail left behind after each and every transaction. You are required to avoid paying through cash for demat account expenses as physical money is really very hard to track.
4. To guarantee financial sanctity in the financial markets, regulators and DPs keep a check on off-market transactions as well. If a transaction is known to be unauthorized or deceitful, the authorities send a notice wanting an explanation for the same. To avoid getting under the scanner, do not bring in unauthorized transfers to another demat account through an offline platform. offline required to not to sign and leave the delivery instruction slip blank. Leaving the DIS blank is proportional to giving a blank cheque. Yes, it could prove to be risky and dangerous for the investments that you have made.
5. Last but not the least, Do not instigate transfer of more shares than you own in your demat account.

Final Thought

As it was discussed earlier, before trying out hands in the risky fields like an investing world, you are always required to keep the utmost information and knowledge about the same. If not done so, you are entering the pool without knowing the swimming.
Demat account is an advanced world thing, and hardly comes up with any limitation at it’s end. They are safer and reliable than the offline methods, where there could be a lot of unwanted difficulties. What you have to do is just choose for the most credible and reputed stock broker for yourself.
Happy (and smart) investing!!

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