Banks offer a lot of services to their customers. But in order to enjoy all these services, you need to first open a savings account. Similarly, if you wish to invest in the stock market, you need to open a trading and demat account.
You can think of your demat account as a savings account for your shares. All the shares that you buy are stored here. And when you wish to sell them, they are taken from here to be sold in the market.
In this article, let’s find out the different steps in order to open a demat account and how you can trade using it.
Steps to open a demat account:
Step 1: Choose a Depository Participant
Depository Participants or DPs are intermediaries between investors and the depository. Brokers, banks and other online investment platforms serve as DPs in the country. Select a valid DP in order to create your demat account. You can find the entire list of DPs on the official websites of the Central Depository Services (India) Ltd (CDSL) and National Securities Depositories Ltd (NSDL).
Step 2: Submit account opening form
Fill out all the details in the account opening form provided to you by the DP. In addition to the account opening form, you will also be required to submit your KYC documents. This includes:
a) Know Your Customer (KYC) form
b) Passport size photographs
c) Identity proof documents
d) Address proof documents
Step 3: Assign nominee
Once you submit all the necessary documents, you will be required to assign a nominee. This is to ensure that the responsibility of your investments would be assigned to somebody you want in case something happens to you. You also have the option of changing your nominee at a later stage if you wish.
Step 4: Verification
You may also have to appear for an in-person verification. The DP carries out this process to ensure that the details provided in your documents are correct.
Buying and selling shares through demat account
Once you open a demat account, you can start trading.
The process is as follows:
Select a stock you wish to purchase. Specify the price and quantity.
For example: Buy stock X at Rs 50. Quantity: 100 shares
You can inform your broker to make the transaction or you can do it yourself online. When the stock reaches the price of Rs 50, the transaction is executed.
100 shares of Stock X will be reflected in your demat account. When you wish to sell them, you can make a sale order by stating the price and quantity of shares.
The DP sends you statements of your transactions on a regular basis. Go through these statements to be updated on your investments.
Demat account is easy to use and very beneficial. You can trade many securities apart from stocks. It also provides statistical analysis and performance tracking features. Above all, it is a safe way to invest.
Disclaimer: "Investment in securities market are subject to market risks, read all the related documents carefully before investing."