Investing in the share market requires the opening of a demat account above all else. This is one mandatory principle that you should never neglect. You can invest in a variety of options for your future portfolio including stocks or shares and even futures and options. There are various methods of investing and trading that you should carefully do your research on, prior to deploying the actual investment.
The actual F&O meaning is Futures and Options. These are representative of various stock market derivatives. These derivatives are key financial instruments that derive most of their value from any underlying including gold, currency or stocks of any company. You can always earn a profit by independently trading in these derivatives. The demat account is the account which is used for holding shares and other securities in the electronic format. The full form stands for a dematerialized account. The whole purpose of opening such an account is to hold shares which have been purchased or dematerialized (converted to electronic shares from physical shares), thereby making share trading more convenient for users when online trading takes place.
While you ponder over which demat account to open, you should know that free demat account services are offered by several depositories in the country including CDSL and NSDL among others. Depository participants, stockbrokers or firms and intermediaries will enable such services. Every intermediary may impose charges for demat accounts which may vary on the basis of the volume that is held in the account, the subscription type and also the terms and conditions between the stockbroker and depository as well. The demat account or dematerialized account, as mentioned, offers the facility of holding onto securities/shares purchased in the electronic format. While trading takes place online, shares are purchased and held in this account. This account will hold all investments made by individuals in shares, exchange-traded funds or ETFs, government securities, mutual funds and bonds in one single place.
Some other aspects worth going over
Dematerialization is the procedure of conversion of physical share certificates into the electronic format which is substantially easier from a maintenance perspective and can be accessed almost anywhere across the world. Investors desirous of trading online will have to open demat accounts with DPs or depository participants. The whole purpose behind dematerialization is the elimination of the investor’s need for holding physical share certificates and also for enabling better monitoring and tracking holdings. Demat accounts offer a convenient and digitally safe method of holding onto securities and shares that have been invested in. This helps in doing away with any loss, forgery, theft or physical certificate damage among other issues. With these demat accounts, you can seamlessly transfer securities instantly without any hassles. Once there is approval for the trade in question, the shares will be transferred digitally into your account. If there are specific scenarios like mergers or stock bonuses, then you will automatically get shares into the account as well.
The demat account details on these activities will only be made available online with a simple website login. You can trade while on the move through your smartphone or even your desktop. You need not always visit the stock exchange for conducting transactions as a result. You will also have the advantage of lower costs of transactions since there will be absolutely zero stamp duty involved in share transfers in such scenarios. These benefits and features of demat accounts will automatically spur higher trade volumes for investors, thereby enhancing the overall potential for earning returns that are quite lucrative in the bargain. Trading via demat accounts is quite similar to the physical trading procedure although it is completely electronic. You will start trading through the placement of the order via the online trading account. You should have your demat and trading accounts linked for this purpose as well. Once the order has been placed, it will be processed by the stock exchange in question.
The demat account will have information pertaining to share market prices and share availability which will be verified prior to the final order processing. Upon the conclusion of processing, shares will then automatically reflect in the statement of holdings likewise. Whenever any shareholders want to sell off their shares, there will be a delivery instruction note provided with all information about the stock in question. Shares will then be debited from the account likewise and the cash value equivalent will be credited to the trading account thereafter.
There are two kinds of demat accounts, namely Non-Repatriable demat accounts and Repatriable demat accounts. Repatriable funds will be deposited into separate bank accounts which are called NRE or Non-Resident External accounts. These funds are those sums which may be transferred abroad easily. The investments made from the same will be maintained in the Repatriable demat accounts while non-repatriable funds will be deposited into a different bank account that is called the NRO (non-resident ordinary) account. There are some differences between demat accounts and trading accounts. The demat account ensures that the investor’s shares remain absolutely safe and sound while enabling investors to store the shares in the electronic form in place of the physical form. Therefore you must choose the best demat account before starting trading. The account will have your current portfolio wealth by way of stocks or shares. You will however require a trading account for buying and selling shares. The account will enable undertaking trading transactions in the stock market likewise.