Advantages and Disadvantages of Demat Account

The first step to trade in equities or stock market is to open a Demat account and therefore before opening an account you should know the advantages and disadvantages of Demat account. Let’s look at some of them –

Demat Advantages

  1. The biggest benefit is that you do not need to hold securities in physical form rather they are kept in electronic form and therefore the risks of losing shares due to theft, fire, flood and earthquake are eliminated.
  2. One can have instant transfer of stocks from one account to another and therefore the whole process of buying and selling becomes fast which in turn increases the efficiency and effectiveness of stock market as a whole.
  3. Since they are hold in electronic form there is no stamp duty on transfer of securities which reduces the transaction costs associated with buying and selling of shares.
  4. Demat account is not only for equity shares but you can keep mutual funds, gold exchange traded fund, preference shares in it which makes it easier for individuals to keep track of their investments as they do not have to check several account, they just have to check their demat account for knowing about their portfolio.
  5. An individual having demat account can even trade for 1 share also which was not the case when you hold them in paper form.

Demat Disadvantages

  1. The biggest limitation is that in order to have a demat account one needs to be internet savvy and therefore people who are not that literate with internet will find it hard to operate their demat account and therefore they tell their brokers or sub brokers to transact on behalf of them which sometimes lead to fraud and mismanagement of funds by the sub brokers.
  2. Another limitation is that since stocks are dematerialised individuals tend to keep looking the stock price more often than they would have if stocks were in paper form and therefore they end up doing trading instead of investment, however this limitation is not of demat account but of individuals as they are not patient enough still many people blame it on demat account when they are asked why they are in a hurry to sale shares.
0 comments… add one

Leave a Comment

Related pages

explain privatisationmeaning of unclaimedincome effect and substitution effect examplesdeflation economics helpbank loan advantages and disadvantagesquota and tariffadvantages of unrelated diversificationcapital account journal entrydirect quotation exchange ratemeaning of wholesale bankingprepaid expenses journal entry exampleassumption of capm modelurbanisation wikiwhat is difference between trial balance and balance sheetdiversifiable risk refers to riskmixed economy advantagesadvantages and disadvantages of barteringadvantages of demat accountadvantages and disadvantages of capitalism and socialismfeatures of capital budgeting pdflocational arbitrage examplemixed economy definition economicsunclaimed dividendtrial balance accounting definitiondefinition of indirect quotefutures advantages and disadvantagesdisadvantages of privatizationwhat is a major reason for conglomerate mergersdifference between bank overdraft and cash creditcharacteristics of capitalist economic systemsemi durable goods definitionfull form of imps in bankingcost oriented pricingadvantages and disadvantages of takeovers and mergersbank loan advantages and disadvantagestypes of factoringdisadvantages of fdisubstitution and income effect examplesdebenture shareswhat are mixed economiesdifference between durable and nondurable goodsexamples of capital receiptsexamples of inferior goods in economicscrossing a chequecomparative balance sheet examplecomparison between socialism and capitalismdenomination intermediationadvantages of debit cardsdisadvantages of factoringdirect fx quotewhat is a horizontal monopolyadvantages and disadvantages of living in rural and urban areasauthorized shares vs outstanding sharescharacteristics of finance leasewhat are the advantages and disadvantages of a mixed economyinelastic goodspricing strategies gcseredeemable cumulative preference sharesadvantages of using fifo methodrelevant costing for managerial decisionswhat are some disadvantages of centrally planned economiesmanagerial accounting relevant costs for decision makingpurchase bill discountingdefinition centrally planned economyskimming pricing exampleswhat is autocratic leadership in businesswhat is full form of micradvantages and disadvantages of bank overdraftfull disclosure principle gaaptransferable letter of credit flow chart