When unsure about a particular subject, you usually have two options. The first is to go ahead with limited knowledge. The second and the more practical one is to find in-depth information about the subject matter and take a calculative step. Following this logic, while you might know about the basics of a Demat Account, it is crucial to be aware of the myths associated with your Demat Account. Let us debunk some of the most common myths surrounding a Demat Account.
Myth #1 A Demat Account only holds shares
Most investors believe that a Demat Account is only useful for holding shares. However, this is not true. A Demat Account is, in fact, a multipurpose facility which can store other financial assets like mutual funds, money market securities, bonds, ETFs, etc.
Myth #2 Holding a Demat Account is not safe
Trading with a Demat Account is entirely safe. This is because SEBI mandates every depository participant to provide highest level of security with robust firewalls. Moreover, each time you make a transaction, you must enter secure authentications to either login or complete a trade. Such measures save you from fraudulent activities.
Myth #3 An individual can only hold one Demat Account
Most investors believe that they can only open Demat Account only once. But this, again, is not true. You may open multiple accounts since there is no restriction on the number of Demat Accounts an investor can own and operate. Besides, if your investment interest lies in several instruments, having numerous accounts works in your favour.
For example, if you are interested in both stocks and Mutual Funds, you can hold one Demat Account for each. That way, your investments stay segregated systematically.
Myth #4 The holder necessarily should pay brokerage charges for each trade
Usually, you need to pay a specific percentage of your trading as a brokerage fee. However, some brokers do not follow this imposition. They offer Zero Brokerage services to their customers. This implies that when an investor makes a trade, no brokerage is levied on the trade.
Myth #5 The holder cannot keep the Demat Account empty
It is not mandatory for you to always hold some form of investment in your Demat Account. It acts much like a zero-balance bank account wherein you do not necessarily have to maintain a balance simply because have opened an account. But remember, you will continue to incur Demat account maintenance charges even if you keep your Demat account empty.
Myth #6 Having a Demat Account is unnecessary
A Demat Account is compulsory to trade or invest in the Indian stock markets. If you plan to trade or invest in the financial markets actively, it is wise to have a Demat Account in place. Not only does it store your equities, but it also holds other investments like Mutual Fund units, ETFs, bonds, etc. It facilitates a hassle-free trading experience. Hence, owning one is necessary if you want to reap such perks.
