Demat accounts have changed how the stock market works. It shifted the trading to an electronic system and now saves the hassles of theft, loss, forgery, and more. Today, every stock market investor will open free Demat account to keep his account secure. But before you sign up for the account, it is important to learn about its advantages and disadvantages.
Benefits of a Free Demat Account
● Assures Safety: An online Demat account ensures secure transactions and the safety of your funds. If you hold your shares in a physical form, there are high chances of loss and theft. Once you lose the share certificate, you will have to go through several challenges for recovery. On the contrary, a Demat account prevents any chances of theft, forgery, and loss.
● Easy Transfer: If there is the death of the Demat account holder, the ownership can be swiftly transferred to the nominee. But if you hold shares in a physical form, the nominee would have to go through a long process to claim his rights. That’s why Demat account opening will be the best decision for you.
● Quick Settlement: When Demat accounts didn’t exist, investors had to wait 14 days to settle their trading accounts. This is not the case anymore. Your online Demat account reduces your settlement cycle from 14 to 2 days only.
● Cost Effective: When the Demat account was newly introduced, the opening and maintenance costs were high. Now, you can open free Demat account and do not have to fret about any kind of charges. Open it with a lighting buzz speed without spending a dime!
Drawbacks of a Demat Account
Now that we have learned about the several advantages of opening a Demat account, here are some of the disadvantages that you should be familiar with –
● Technology Friendly: To learn about the Demat account opening, you have to talk to a tech-savvy individual. It is not as easy as holding a physical share certificate and takes a lot of understanding. Generally, investors have to rely on brokers which can result in mismanagement or fraud.
● Unreliable Broker: If you aren’t tech-savvy and have to hire an online stock broker to manage your funds, that is a risky move. If you have to hire a broker anyhow, ensure that he maintains 100% transparency, is from a reputed financial corporation, and follows high corporate governance standards.
● Churning Portfolios: Trading has become simpler with an online Demat account. This results in investors continuously trading in shares and it can affect their wealth goals. Demat account has resulted in investors dealing in short-term investments instead of thinking about their long-term goals.
When you open free Demat account, it comes with its own sets of negatives and positives. That doesn’t mean investing in stocks through a Demat account isn’t beneficial. The benefits are greater than the drawbacks; if the right steps are taken, you can always gain wealth from the stock market. For better guidance, you can always connect with a stock market expert.