A demat account—short for dematerialised account—is an account that allows you to hold company shares and securities electronically.
You can hold dematerialised securities such as stocks, mutual funds, bonds, exchange-traded funds (ETFs), etc. in a demat account.
So when you place an order to buy a stock, the shares get credited to your demat account. Similarly, when you choose to sell your shares, they get debited from your demat account.
One of the biggest benefits of demat account for investors is that it is digital. Having said that, there are many other advantages of demat account that can be listed as follows.
1. Security of shares: The most important benefit of demat account is that it is safer than holding physical shares which can get lost, damaged, or stolen.
2. No forgery or theft: Since the demat account is electronic in nature, the risk of documents getting stolen, damaged, or lost does not exist.
3. Seamless trading and transfer: Unlike transporting physical certificates, demat accounts allow the transfer of shares quickly and securely. This has lowered order processing times.
4. Lower cost: Physical share certificates attract paperwork and stamp duty, which increases costs. With a demat account, all this is eradicated and you can get a demat account in no time.
5. Multiple access points: A demat account is operated electronically, which essentially means that users can access the account from multiple touch points—mobile, tablet, PC, laptop, etc.