In this 21st century, people are trying their hand in different things. If they are working in a specific field, it does not mean they aren’t trying out somewhere else. There are options that are getting availed by people to make the most of their life. They go for different accounts like Demat account and do the things that bring them extra income or perks.
What is a Demat account?
Talking about a demat account; it is an account that holds all the shares that you buy in electronic or dematerialized format. In a common way, a demat account is to your shares what a specific bank account is to your cash. Just like a bank account, a demat account do hold the certificates of your financial instruments such as shares, government securities, bonds, mutual funds and exchange traded funds (ETFs). Once you research a little, you can come across the Best Demat account in India for your use.
How does this account work?
Central Depository
Well, for your information, there are two depositories in India named the CDSL and NSDL. These hold all the demat accounts. The central depository keeps the details of all your shareholding on your behalf just like banks.
A Unique ID
Every single demat account possesses a unique number for identification purposes. It is the number that you require to provide for transactions. The number is going to help the exchange and businesses or companies identify you and credit shares in your account.
Depository Participants
Access to the central depository is catered by the Depository Participants or DPs. They perform as the intermediary between central depository and investor. DPs can be brokers, banks or financial institutions that are authorized to offer demat services.
The Portfolio Holding
A demat account keeps all your securities. So, whenever you check the account you have, you can see your portfolio holding and all the details attached to it. These get updated automatically every time you do a transaction – be is purchasing or vending a security.
What actually this Dematerialization is?
Technology has brought about a radical change in the everyday lives of people. The stock markets also have not been left untouched by these changes. In the year 1875, the Bombay Stock Exchange was got founded with an open uproar floor trading exchange. The traders used to stand on the floor and shout the prices of stocks for purchasing or vending. Next, money would be exchanged for the physical receipts of shares known as the certificate. Such a thing led to a huge amount of paperwork.
Even the settlements of all the trade agreements took time because of need to deliver share certificates.
Then in the year 1996, dematerialization was gripped. Dematerialization is the procedure by which physical share certificates detained by an investor get converted into an equivalent number of securities in electronic format and credited into the demat account of the investor.
Conclusion
Thus, if you feel that you should also have an account then you must look around and pick the one that suits your needs. Once you understand the entire concept, things get simpler and interesting.