A Demat account has made life for investors, traders, and all the entities involved in trading much simpler than in previous times. A Demat trading account, or a Demat account linked to a trading account, gives investors a seamless way to invest, hold their securities in one place digitally, and have all the relevant safety checks and balances in place.
While the process of opening a Demat account is easy, and most reputed brokerages offer this service for free, there are some considerations to keep in mind while investors operate accounts. In this article, ten key considerations will be highlighted so you can invest with your Demat account in a hassle-free way.
10 Tips for Operating a Demat Account Smoothly
You may be a savvy investor, but when you open your Demat trading account, you should consider the following 10 key factors when you are operating your account:
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Tip #1: Know How Your Account Works
The first tip may sound obvious but it is something that is commonly overlooked. Knowing how a Demat account and linked trading and bank accounts work is crucial to handling your transactions and monitoring them.
A Demat account is an electronic holding account that digitally stores your securities. A trading account can be linked to it and this enables you to buy and sell securities (like shares). A linked bank account is for the ease of credit and debit of funds when you want to sell and buy securities.
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Tip #2: Monitor Your Transactions
The process of online trading has been simplified with brokers offering investors advanced digital platforms for executing trades. However, with any online transactions, there are chances for error and after you complete a transaction you must check to see whether everything is in order.
Brokerages usually send emails and SMS messages to let you know the details of your transactions. You also get a transaction statement regularly if you opt for this. It is important to verify all transactions and keep track of your account.
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Tip #3: Note Your Demat Account Charges
As an investor, you should always be aware of the charges tied to your Demat account. When you are charged a fee for transactions or maintenance of the account, make sure it is what you signed up for, and that your transactions match the amounts charged.
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Tip #4: Memorise Your Security Codes/Passwords
While operating a Demat trading account, you will have to use certain passwords and security codes to gain access to your account and make trading transactions. See that you memorise these as keeping them written or recorded somewhere may leave them open to security breaches. It is important to note to never share private login details or information.
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Tip #5: Don’t Let Your Demat Account Be Inactive
Sometimes, investors may make long-term investments and forget about them. In case investors have not executed any transactions or trades, especially for a consecutive period of 12 months, the account may become dormant. However, investors could still be charged fees for the account, or opportunities for misuse may arise. Investors may consider monitoring their accounts and in case they know they are not going to use accounts, think of freezing them temporarily.
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Tip #6: Monitor Your Account Regularly
With the process of online trading being a few clicks away, keeping a regular check on your Demat account is also done just as easily. It’s not just the transactions you should check and be aware of, but you must regularly check your Demat account for balances and other payouts like dividend payouts.
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Tip #7: Be Aware of Fee Waivers
Depending on the brokerage or DP you use for your Demat and trading account activity, brokerages charge different yearly maintenance fees. However, if you have a minimum balance maintained in your account, this fee may be waived. You should know, according to your broker, what the fees are and if there are any conditions for fee waivers.
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Tip #8: Be Cautious While Operating Multiple Demat Accounts
You are permitted to open more than one Demat trading account, only with different brokerages or DPs. If you opt for this, then make sure that all accounts are tracked regularly as having more than a single account to manage your investments entails time and effort. This also means that you must keep more passwords and login details secure.
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Tip #9: Avoid Herd Mentality
Having a Demat account and using it means trading regularly or investing for the long term. While you have easy access to your Demat account for trading and investing anytime and from any location, it is easy to give in to the temptation to blindly follow ‘advice’ and make trades.
This may not be potentially fruitful. Furthermore, financial advice should be validated and verified, no matter the source. Rather than following the herd or investing based on ‘tips’, investors may be wise to consider their investment choices based on their own research and investment goals.
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Tip #10: Know Your Investment Portal
A Demat account opens the gates to trading and investment opportunities that may potentially be lucrative. Nonetheless, investors should be aware of the trading platform they are using to avoid errors in trading activity.
While the process of online trading appears simple enough, investors may be prone to making errors while making trades.
Your Demat Account – Your Path to Investment
Demat accounts have given access to many Indians to trade and invest. They make your investing life easy with smooth and secure transactions.
Although Demat accounts are technologically advanced in their operation, investors must consider some factors so that their investments are protected and transactions are seamless.
