How to Open Demat Account – Process, Charges & Advantages

Posted by Mehul Kothari | Published on 12 Apr 2019
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How to Open Demat Account – Process, Charges & Advantages

How to open a demat account?

Having a demat account is one of the pre-requisites of trading in the stock market. Prior to 1997, securities were held in the physical form i.e. in the form of share certificates. On buying shares, investors were given the contract note along with the share certificates and the transfer deed by the broker. Investors would then send the share certificates and transfer form to the company’s registrars. On receiving and successfully verifying the certificates and transfer form, the registrar would include investor’s name in the register of shareholders and issue them fresh share certificates. However, this process often involved issues such as loss or theft of share certificate, difficulty in storing and maintaining share certificate, bad deliveries, signature mismatch, etc.

With the introduction of dematerialisation, these securities are now held in the demat account. A demat account not only saves from the above-mentioned hassles but also makes the entire process of trading and investing very quick and easy.

It is important to open demat account if you are willing to trade or invest in the stock market. In fact, according to a recent report of Economic Times, approximately 3.76 million demat accounts were opened only in the year 2017-18. If you too are willing to gain from the potential of the stock market, you can do so by opening a demat account online.

This article will walk you through the entire process of how to open demat account. But before we understand the demat account opening procedure, let us first understand the meaning of the demat account.


What is a demat account?

The word demat is an abbreviation of word dematerialisation. A demat account is just like your bank account. In fact, it operates also just like the bank account. Just like you hold cash balance in your bank account, you hold shares and other securities that you own in your demat account. These are held in dematerialised electronic form. These days all the share purchases and sales are done only through a demat account in non-physical form.

Now that you know what is a demat account, let us learn the free demat account opening procedure.


How to open demat account online?

Step 1
In order to open demat account, you have to reach a depository participant with whom you wish to open an account. The depository participant is an agent of the depository (i.e. CDSL - Central Depository Services Limited or NSDL - National Securities Depository Limited). The depository participant could be a broker, bank or other financial institution offering the service. You may find the list of depository participants on the official website of the depositories.
Even though you open demat account with the depository participant, the custody of your actual shares will be held with the depositories (CDSL or NSDL) which ensures enhanced safety and security of your holding.

Step 2
Once you have finalised your depository participant, you need to fill up an account opening form with them. Along with the form, you also need to submit the photocopies of your KYC (Know your Client) documents for proof of identity (which includes PAN card, voter's ID, driving license, passport, IT returns, and other government issued ID cards) and proof of address (which includes telephone bill, electricity bill, voter’s ID, bank passbook or bank statement, etc.). In addition to the above-mentioned documents required for a demat account, you will be required to furnish the copies of your passport-sized photographs and your PAN card. Do not forget to keep the original documents for verification purpose.

Step 3
At this stage, you will be given a copy of the Depository Participant-Investor agreement which specifies the rules, regulations, rights and obligations regarding the agreement. It will also contain the schedule of charges that you are supposed to incur in the future. It is advisable to carefully read the agreement and understand the terms of the agreement before signing it.

Step 4
In the fourth step, an in-person verification would be carried out by the staff of the depository participant in order to ascertain the truthfulness of the details provided by you in the account opening form. These days, a lot of brokers also encourage in-person verification over the webcam which makes the process much easier.

Step 5
Once all the documents are verified, the depository participant will open an account and give you the account number or client ID, also known as a beneficial owner identification number (BO ID). This unique number will be used for all future transactions, IPO applications, etc.

With the above-mentioned steps, you will be able to easily open demat account online. Once your demat account is operational, all the share purchases will be credited to this account and all the shares sold will be debited from this account. However, you must know that a demat account can only hold shares and securities in custody and therefore you will need a trading account in order to transact i.e. buy and sell shares and securities.


Few things to know about the demat account

• You can have multiple demat accounts if you wish to.
• You can open a demat account with zero balance of shares as it does not require you to maintain any minimum balance.
• It is not mandatory to open a depository participant account with your stock broker. You may choose to open an account with any depository participant as per your convenience.
• It is advised that you update your bank account details and any change in your postal address to the depository participant as you will be sent refunds, dividends, interest, etc. in your bank account and all the correspondences will be sent to the postal address mentioned in your demat account.


Charges for opening demat account

Most of the depository participants do not charge an account opening fee for a demat account. However, there are other demat account charges which an investor has to bear. These include annual maintenance fee for maintenance of the account, transaction fees for selling shares from the account on a monthly basis, fee for dematerialisation and rematerialisation of securities, etc.

The demat account charges vary from one depository participant to others. Some may charge a flat fee on every transaction while others may charge a fee based on the type of transaction (i.e. buying or selling).

You may find the demat account charges of various depository participants on the websites of the depositories. All you have to do is compare and find out the depository participant that best suits your needs.

Now that you are aware of the entire process of how to open demat account, you must also be aware of the advantages and features of a demat account.


Advantages of opening a demat account

• The biggest advantage of opening a demat account is that it saves from the hassles of theft of certificates, loss of certificates in transit, issuing duplicate certificates, etc. Unlike paper certificates, dematerialised shares and securities do not carry any storage risk and cannot be stolen, forged or damaged.
• In case of change of address, you are no longer required to intimate and write separately to the registrar for each company whose shares you own. With the demat account, you just have to intimate your depository participant once.
• Unlike trading with physical certificates, the demat account does not have a requirement of minimum lot size which encourages even small investors to participate in the equity markets.
• It involves minimum paperwork as shares and securities are held in electronic form.
• Trading in demat account saves time and involves quick settlement.
• It is a secure and easy way of transacting in the stock market.
• You can easily keep a track of all your holdings in your demat account.

With numerous advantages of a demat account, more and more people are opening their demat account and making their stock trading a seamless experience. You too can open a demat account in a few simple steps with a renowned broker like IndiaNivesh. So, open your demat account now and enjoy a hassle-free trading experience.


Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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4 mistakes to avoid while investing in gold and other commodities

Posted by Mehul Kothari | Published on 11 Apr 2019

Gold is so popular in India that 11 out of 10 people in the country are interested in owning it. That statistic may not be true but you get the drift. This piece of yellow metal has captivated a billion people for thousands of years. Other commodities like agricultural products, energy and livestock don’t hold the same degree of fascination. That said, the commodities market is a popular avenue among investors in the country. But if you are newcomer to commodity trading, you need to be careful of avoiding some of the common mistakes people make. It’s always better to learn from experience, even if they are not yours. So, let’s look at a few banana skins you should look to avoid in the field of commodity trading when you set out on the road to commodities investing. 1) Investing for the short termGold is a very valuable asset among Indian investors for short term investments. However, to avoid mistakes to avoid while investing in gold, don’t invest with unrealistic expectations. Hopes of a 50% appreciation in gold price in six months or a year can leave you disappointed. When you invest in gold for short term investments, it is better to have a long term approach. This can help you ride the volatility in the short term. In addition, be careful not to depend too much on gold during short-term financial requirements. In case you liquidate your investment at a short notice, your returns may be much lesser than expected. 2) Not maintaining a stop lossWhen it comes to investments, everyone makes mistakes. But the good investor knows when to exit an investment at the right moment and minimize his losses. It is well known among investors that commodity trading comes with a certain amount of risk. A wrong investment can result in big losses for the investor if he is not careful. That’s why it is important to maintain a stop loss to personally protect your trading positions. 3) Going big right from the beginningMany novice traders make the mistake of going big on their first investment itself. This can be a risky proposition in commodity trading. If you are new to the market, here’s one of the most important commodity trading tips -- it is best to begin your journey with a small sum of money. This way, you protect your capital against unnecessary losses. Over time, you can improve your trading record by expanding your knowledge on global events and price fluctuations in the market. With respect to gold, you can invest in even 1 gm through gold ETFs online. This is another one of the crucial good investment tips to begin your investment journey into commodities. 4) Lack of diversificationNever invest your entire capital in a single commodity. For example, you might find the metal sector very attractive or perhaps the energy sector shows great potential for high returns in the near future. Regardless, it is better to allocate your capital into different assets to minimize your losses in case a single commodity or sector falls unexpectedly.To sum up Commodity trading offers great opportunities for good returns. However, it is important to remain calm and patient when you invest in commodities. When compared to investment in the stock market, commodities futures contracts provide investors with a greater degree of investment flexibility. That’s why, it is important to be aware of your personal risk-reward ratio and invest accordingly.It is important to know that not all commodities are equally risky. To ensure your te right pic, you may want to gauge the amount of risk suited to your profile. This is crucial, because commodities undergo extraordinary price movement on the slightest hearsay of critical news.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Demat Account – Meaning, Features & Benefits

Posted by Mehul Kothari | Published on 12 Apr 2019

What is a Demat Account?Demat Account Introduction Investing and trading in the stock market is gaining a lot of popularity these days. But you just cannot invest or trade in the stock market without the proper means. You need a demat account or dematerialisation account to invest in the stock market. Having this account is the primary requirement to buy and sell shares. In India, there are two depositories who provide the service of demat account: National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). You can open an account by availing the services provided by these two depositories through intermediaries or depository participants or stock brokers. In this article, you will get to learn about demat account information and its related concepts.Firstly, let us learn about the demat account meaning.What is Demat Account?Demat account or dematerialised account is an account that holds the shares and securities that you own in an electronic form. You can purchase or sell shares through the online demat account. It is just like a bank account which holds your money at one place. In this account, all your shares, mutual funds, government securities, bonds and exchange-traded funds are held at one place.While understanding the demat account information, you must have come across the term “dematerialisation”, let us now understand its meaning.Meaning of DematerialisationDematerialisation, is converting the physical share certificates held by investors into electronic form. With dematerialisation, you are no longer required to hold shares or securities in physical form. By dematerialising, you can easily access your demat account from anywhere across the globe.Let us now read about the facilities offered by this account.Facilities Offered By a Demat Account• With the help of the Delivery Instruction Slip (DIS), you can easily transfer your shares to another individual. The transaction is hassle-free because the slip contains all the relevant details.• The shares held in the demat account can help you in availing the loan facility from the bank. You can keep the shares held in the demat account as collateral security and avail loan against it.• With this account, you can easily convert your shares and securities held in physical form into electronic form.• With the availability of online demat account, you can access and transact through this account by using a desktop, laptop or smartphone from anywhere around the world.• It provides you the facility of availing the corporate benefits associated with the shares held in this account. Benefits or actions like dividend, refunds, interest, stock split, rights issue, bonus shares, etc. are automatically updated in this account.• When the holder of the account holds a specific quantity of shares and securities in it, he can avail the facility of freezing the demat account. This is done so as to avoid any debit or credit into the account due to any reason or cause.This was about the facilities offered by a demat account, let us learn about the benefits of opening an online demat account.Benefits of Opening Online Demat Account to Investors • It provides the facility to individual investor to trade from anywhere in the world.• With this account, the individual investor is not required to maintain extensive paperwork of the transactions and visit the broker regularly.• It is much safer, quicker and also helps in overcoming inefficiencies like delayed settlements and deliveries.• Since trading can be done from anywhere with this account, it generates more interest and increases the participation of investors in the share market.• The shares held in this account are widely accepted in the form of collateral security for obtaining a loan.Let us now read about the benefits this account from the perspective of a company.Benefits of Demat Account to Company • With this account, the companies are able to maintain a more transparent trading system that enables them to efficiently transfer shares electronically to the shareholders.• It eliminates the use of paper which makes the work easier on the administrative front and it is convenient to store data online rather than on paper.• Because of online demat account, the companies are no longer required to print and distribute the shares to the investors. This helps them cut costs and saves their valuable time.• Since the shareholders are now using this account, the companies can easily communicate with the shareholders and pass on the necessary information electronically. Let us now read about the benefits of this account from the perspective of brokers.Benefits of Demat Account to Brokers• With the introduction of this account, the brokers are able to provide better services to the customers because now they don't have to worry about the risks related to theft, bad delivery or fraud.• It has increased the interest and participation of the investors. This has resulted in an increase in earnings and profits of the broker.• Brokers can be trusted because of the quick and easy transfer of demat shares. It helps in trust building and increasing the confidence of investors.ConclusionDemat account provides the investors with an opportunity to trade and invest in the Indian stock market. No one can participate in the stock market without opening this account. Being the primary requirement to invest in the share market, it has many benefits and advantages to a wide number of participants associated with the stock market. Demat account is the safest, reliable and quickest way to transact in shares and securities. You can open this account without having any shares in the account and also maintain a zero balance in the account. In order to open a demat account, just visit the website of a reputed stock broker like IndiaNivesh and complete the formalities to enjoy the services.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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Benefits of ULIP A ULIP is popular because of the following benefits it provides – It allows you to avail insurance coverage as well as investment returns in a single product The premiums paid and the benefits received under ULIPs are completely tax-free in nature helping you save tax The flexible benefits of ULIPs allow you to manage your investments as per your investment strategy The different types of ULIPs help you fulfil the various financial goals that you might have Switching and partial withdrawals do not attract any tax making ULIPs tax efficient Since the returns are market-linked, you get inflation-adjusted returns from ULIP ULIPs are attractive insurance policies that give you coverage as well as returns. Now that you understand ULIP meaning, its types and advantages, use our IndiaNivesh platform to invest in a plan as per your insurance and investment needs and enjoy all the benefits that the plan has to offer.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

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  • What is CAGR & How to Calculate it?
    Posted by Rushabh H. Mehta | Published on 06 Mar 2020

    There are different types of investment avenues in the market and each of these avenues promises you a compounded rate of growth if you remain invested. Compounding of return means earning a return on the return earlier generated. So, if you invest INR 100 and earn a return of 10% in the first year, the amount would become INR 110. Thereafter, in the second year, you would earn 10% on INR 110 giving you a return of INR 11. This compounding helps grow and multiply your wealth considerably over a period of time. In the case of market-linked investments, the rate of return is not guaranteed. It varies over the investment period. To know the average rate of return on your investments, the concept of CAGR is used. Let’s understand what CAGR is and how it helps you find the growth of your market-linked investments. What is CAGR? CAGR’s full-form is Compound Annual Growth Rate. 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Investors can check the annual CAGR of mutual fund schemes and use the rate to find out which scheme offers better returns than others. The fact sheet offered by the mutual fund house contains returns generated by the fund over different time frames. These returns can prove to be confusing and so CAGR is an easier alternative to understand the performance of the fund. CAGR acts as a ready reckoner for investors to assess returns from a mutual fund scheme and also highlights the compounding of returns on mutual fund investments. Important points to know about CAGR The investment risk inherent in the scheme is not highlighted by CAGR. CAGR is merely a yardstick to measure the growth rate CAGR proves to be a good measure of growth for a short-term period, i.e. up to 6 or 7 years. If you are considering long-term investments, the growth trends over a short-term period would be averaged out. 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Annualised returns Annualised returns are calculated as the geometric average of the return yielded by the fund over a given period of time. CAGR v/s Absolute returns Absolute returns measure the total return yielded by an investment. The time period is not considered. CAGR, on the other hand, measures the return over a specific time period. For instance, in the previous example, INR 10,000 grew to INR 13,500 over a 3-year period. The absolute return would be 35% since it measures the total return earned on the investment. However, when CAGR is considered, the time period of investments is also taken into consideration thereby considering the time value of money. As such, CAGR comes to 10.52% which is a more realistic figure. While absolute returns show the returns generated, the time period is missing. You cannot figure out how many years it took the investment to generate this return. But CAGR shows you the annual return making it easier to make a judgement on the performance of the fund. The next time you invest in mutual funds, stocks or other market-linked investment avenues, consider their CAGR to choose the fund or investment which has better returns over its peers. So, visit IndiaNivesh and find out a mutual fund scheme of your choice and then compare the scheme’s CAGR with its peers to choose the best performing fund.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing. 

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  • Capital Market – Meaning, Types & Functions of Capital Market
    Posted by Mehul Kothari | Published on 20 Nov 2019

    We all know how various companies and industries raise funds for their short term requirement through the money market. However, when they need funds for long term, capital market is their source. The capital market is just like the money market but with a difference that funds raised in the capital market can be used only for long term. In this article, you will learn about the concept of capital market in detail. Let us first understand what is the capital market? Understanding Capital Market Capital market in simple words means the market for long term investments. These investments have a lock-in period of more than one year. Here, the buyers and sellers transact in capital market instruments like bonds, debt instruments, debentures, shares, derivative market instruments like swaps, ETFs, futures, options, etc. Let us now understand the types of capital market. Types of Capital Market The capital market is of two types i.e. Primary Market and Secondary Market. 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Ways of Raising Funds Offer through Prospectus In the primary market, the prospectus is used to raise funds. The company invites the investors and the general public through an advertisement known as the prospectus to subscribe to the shares of the company. The shares or debentures are allotted to the public on the basis of subscription. If the company receives a high subscription then allotment is done to them on pro-rata basis. The company hires merchant bankers, brokers or underwriters to sell the shares to the public.  Private Placement Some companies try to avoid the IPO route to raise funds as it is very costly. Instead, they give investment opportunity to few individuals via private placement. Here the companies can offer their shares for sale to select individuals, financial institutions, insurance companies and banks. This way they can raise funds quickly and economically. Rights Issue The structure of capital market allows the companies in need of additional funds to first approach their current investors before looking at the other sources for finance. The right issue gives the current investors the first opportunity to make additional investments in the company. The allotment of right shares is done on pro-rata basis. However, if the current shareholders of the company do not want to exercise their rights, the shares can be offered to the public. e-IPO e-IPO means Electronic Initial Public Offer. e-IPO is an agreement between the stock exchange and the company to offer its shares to the public through online mode. It is a fast and speedy process. The company here needs to appoint registrar to the issue and brokers to accept the application received from the public. The above mentioned are the ways of raising funds through the capital market. Let us now learn about the various functions of the capital market. Functions of the Capital Market Helps in the movement of capital from the people who save money to the people who are in need of it. Assists in the financing of long term projects of the companies. Encourages investors to own the range of productive assets. Minimises the transaction cost. Helps in the faster valuation of financial securities like debentures and shares. Creates liquidity in the market by facilitating the trading of securities in the secondary market. Offers cover against price or market risks through the trading of derivative instruments. Helps in efficient capital allocation by way of competitive price mechanism. Helps in liquidity creation and regulation of funds. The above mentioned are the functions of the capital market. The capital market performs its functions with the help of buyers and sellers who interact and transact. The structure of the Indian capital market is well regulated and highly organised. The capital markets may be sometimes termed risky because they do not give fixed returns annually. But when looked from a long term perspective, their performance has always been good and rewarding for the investors. If you want to learn more about the capital market or put your savings in the capital market, you can contact IndiaNivesh Ltd.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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