An investor can open a demat account online without being involved in burdensome paperwork as stockbrokers serve with a 100% digitised account opening process. But, keep in mind that decrypting technology is as easy as developing it. Therefore, to ensure the safety of your investments, here are important four things you should know to avoid losses.
Before jumping into the core topic, let us briefly explain the demat account.
What is a Demat Account?
A demat account is a beneficial account as it has made the investing process easy, fast and convenient. Investors can invest in several financial securities with just a few clicks.
- It enables you to trade securities on the stock exchanges.
- Markes the share transfers process speedy and far simpler than ever.
- Eliminates the risk of forgeries, delay and frauds in the delivery of shares.
- You can monitor and track all your securities in one place.
- You can have a record of every transfer and transaction.
How to open a demat account online: You can open a demat account online using your PAN card. While choosing a broker, prefer a broker with high-end technical support to ensure security of your investments.
Considerations to Avoid Losses
1. Avoid Trusting Brokers Blindly; Maintain a Record of Securities
- Investors get the demat account statement periodically. You should assess these statements thoroughly to check that all the recorded transactions are made by you only. Maintaining a record of your demat holdings will help you to spot discrepancies.
- You should validate the debit/credit of securities from/into your demat account each time you sell/purchase any securities. Check the number of securities debited or credited, whether it is the same as per your trade or not.
- Generally, it takes T+2 days (Transaction date+2 days) for the securities to be credited into your demat account. It can take more than two days if there is an exception, such as an auction due to short delivery. You should confirm the date to get securities credited into your demat account. If required, keep following up with your broker. It is necessary to keep your securities safe.
2. Avoid Leaving Debit Instructions Slip (DIS) Book with the Broker
- A DIS is used to transfer securities from one demat to another. Keep your DIS under lock as you lock your cheques book. Never leave a signed DIS with your stockbroker. If you do so, be ready for acute consequences. It will be like an invitation to fraudulent activity on its own. You can choose a central depository’s online transfer facility EASIEST to avoid any fraud.
3. Avoid Unnecessary Multiple Demat Accounts
- There is no restriction to open more than one demat account. You can open as many as you want demat accounts with different brokers. Ideally, you can open two demat accounts. One account can be used for long term investment and another for trading purposes only.
- If you want more demat accounts, consider the demat charges that each of your demat accounts will carry. You can open free demat accounts, but you have to pay annual account maintenance fees separately for each demat. It would be an unnecessary liability and leads to extra expenses, i.e., loss thereon. Thus, limit to your actual need.
4. Avoid Leaving Your Demat Account Idle
- Whenever you want to take a break from trading due to travelling or functions at home or any other event that requires your presence, it would be best to freeze your demat account.
- You can freeze the debit function of the demat account and leave the credit options open. This act will ensure that no debits can occur from your demat account, but you can still receive all your corporate benefits like bonus, dividends, interest, refunds, right issue, splits, etc. When you feel comfortable to start trading, make an application and unfreeze your demat account. It ensures the safety of your holdings in your absence.
This way you can save yourself from unseen dangers. If you have changed your accommodation or using a new email ID or mobile number, make sure you update your latest coordinates with the broker immediately to ensure the safety of the demat account. Recently SEBI has mandated authentications to place a trade. Keep your contact details up-to-date with your broker to get each and every update regarding activities in your demat account.
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