What are some myths and facts about Demat Account?

Demat Account

Earlier, investors had to preserve the physical certificates of their investment instruments until the world decided to go digital. Now, it has become possible to make and save investments online. This is possible with a Demat Account. It is a short form of dematerialisation and Account allows you to hold all the investments electronically. Having given the Demat Account introduction, let us check the myths and facts surrounding the same.

1. Myth: Can hold only shares in the Account

Most of the investors are under the impression that the Demat Account allows only shareholdings and that there is no scope for other securities investment.

Fact: A multi-purpose Account

Demat Accounts are multi-purpose in which you can hold all your market instruments. This includes stocks as well as mutual funds, exchange-traded funds, money market securities, Government securities, and so on. This is the dematerialisation process.

2. Myth: Demat Account are unsafe

This myth arises from the fact that Demat trading gets done online, which can expose information about the investments to miscreants.

Fact: Trading through Demat is safe

The Account providers are mandated by SEBI for creating safe trading platforms with secure firewalls. You must log in to your Account each time you make a transaction. Some intermediaries also need you to enter the OTP sent on your registered mobile number, every time you log in. There are other authentications you make a transaction.

3. Myth: Can open only one Demat Account

Investors are often told they cannot hold multiple Accounts as it turns out to be inconvenient.

Fact: Can open multiple Accounts

There is no limitation on the holding of multiple Accounts. It is essentially useful for investors who like to invest in a wide range of investments and track them accordingly. For instance, you can maintain the shares in one Demat Account and open the other for mutual funds, and so forth.

4. Myth: No charges for opening Demat Account

Some investors believe that Demat Accounts are available freely and can open them easily online without paying any fees.

Fact: Charges for both Account opening and maintenance As a part of the dematerialisation process, investment companies and banks charge on account opening as well as maintenance. This myth about the Account perpetrates from the fact that banks and investment firms do not levy any fees for account opening and is merely a customer acquisition tactic. If you do not get charged for Account opening, you get quoted higher costs for annual Account maintenance.

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