Dematerialization has revolutionized the way people invest in the stock market. Indian financial markets introduced the concept of “Demat” accounts in the early 1990s, and since then, Demat stocks have become the most popular way to invest in the stock market. Demat stocks offer several benefits to investors, some of which are discussed below.
Safe and Secure Investment
Demat stocks offer a high level of safety and security. Before dematerialization, investors had to keep physical share certificates with them, making them susceptible to damage, theft, and misplacement. Dematerialization has eliminated these risks, as shares are now held in electronic form. The shares are traded and held in a Demat account, which ensures maximum security of the investor’s holdings.
Easy Access to Investment Portfolio
A Demat account provides easy access to the investor’s investment portfolio at all times. Investors can easily view their Demat account holdings using online portals or by logging in to their trading account. The Demat account provides a detailed report of transactions, including the quantity, date of purchase/sale, and the price at which transactions are executed. This easy access helps investors keep track of their investments and make informed judgments.
Cost-effective
Investing in Demat stocks saves investors a significant amount of money. Previously, the physical transfer of securities incurred costs such as stamp duty, share transfer fees, brokerage fees, and other expenses. However, these fees are eliminated with Demat accounts, reducing transaction costs considerably. Additionally, trading in Demat stocks involves lower brokerage fees compared to physical trading, which adds to the overall cost-effectiveness.
Quick and Easy Transactions
Demat accounts allow investors to buy or sell shares with ease. Transactions can be executed quickly and efficiently, often within a few clicks through online trading portals. The transfer process is electronic and can be completed in a matter of minutes, ensuring faster and smoother transactions for investors. Quick transactions also offer trading flexibility, enabling investors to react quickly to market trends and volatility.
Elimination of the Risks of Bad Deliveries
Delays or discrepancies in share certificates, or “bad deliveries” used to be a common cause of concern for investors in the physical trading era. Such delays can lead to financial loss and a waste of time. However, Demat accounts have eliminated these risks, as shares are now traded and held in electronic form. Since electronic shares require no physical share certificates, the probability of any delay or mistake is virtually non-existent.
Demat stocks Provide Investment Opportunities in Multiple Financial Instruments
By investing in Demat stocks, investors can access a variety of financial instruments such as equities, bonds, exchange-traded funds (ETFs), mutual funds, and initial public offerings (IPOs). Demat accounts provide investors with an opportunity to hold all these instruments in one place, reducing the hassle of managing multiple accounts.
Ease of Statutory Activities
Demat accounts have made statutory activities such as transfer of ownership, settlement of trades, and paying dividends easier. Investors can now transfer ownership of securities simply by transferring securities from one Demat account to another. Additionally, Demat accounts provide an automatic payout of dividends, eliminating the need for physical dividend warrants and ensuring prompt dividend payouts. With Demat stocks, investors can also receive electronic credit of dividends, which is particularly useful, especially for those who reside far from dividend-paying locations.
