Understanding the forms of Demat account

A Demat account is a form of account that enables investors to hold shares or securities in an electronic format. It also enables an individual to keep a track of the investments made in various security forms,what is Demat account is understood by now but there are several benefits associated with this account before you proceed ahead?

The working of a Demat account

The purpose of a Demat account is to hold the shares that are purchased

• If you are looking to purchase or sell a particular share, you would need to log in to your Demat and trading account. This is an account that is linked to your bank account
• The moment when a buy or sell request is placed in a Demat account, the depository participant forwards this to a stock exchange on an immediate basis
• In this case if the order is to buy the stock exchange it searches for sellers and if the price matches you are directed to go ahead. The message is sent over to the clearance houses that are going to debit the transactions.

The benefits of a Demat account

• Eliminates the need for paper-based share certificates. Before the emergence of the Demat account, all the trading of shares used to be conducted in physical form. There was every risk that the shares could be lost. Even the transfer of the shares was prone to lengthy paperwork that resulted in unnecessary hassles
• Convenient storage and transfer of shares- This means you may store any volume of shares so that you can trade in volumes and monitor all the value of the shares that you hold in a Demat account.
• Stores various forms of investments- It is not only the shares a Demat account can store various securities that turns out to be a definite advantage of sorts.

How to use a Demat account

The process of using a Demat account is relatively simple. Your account will be linked to the trading account that in turn links to your bank account. To begin trading you have to transfer funds from your bank to the trading account.

After adding funds, to your trading account, you may place an order for shares. The moment the order gets executed; the shares are transferred to your Demat account at the end of T+ 2 days. Since both these accounts are closely integrated, all the transactions are known to happen smoothly and efficiently. In the same way, you can sell a share in your Demat account by placing a sell order in the stock exchange using your trading account.

Platforms like 5 paisa enable you to open your Demat account in a time span of 10 to 15 minutes. Though this is done when you submit the application and there is no form of error in the prescribed form. You also link your trading account with your Demat account. This means you do not have to enter the details before you make a transaction every time.