Share market trading in India is not as easy as it might seem. Traders must analyse market trends, growth projections, and other reports to make informed decisions. Sometimes, the value of shares under holding might go down significantly. In such a case, financial discipline and patience are a must. If you know nothing about the share market, you can start by opening a Demat account. Online Demat account can be opened within minutes in today’s digital era. Did you know that some investors in India have multiple Demat accounts? According to SEBI (Securities and Exchange Board of India), having multiple Demat accounts is legal. Read on to understand the pros and cons of having multiple Demat accounts in India.
Do you understand the working of a Demat account?
Before knowing the pros/cons of having multiple Demat accounts, it is essential to understand their working. A Demat (Dematerialisation) account in India is used for holding financial securities. For example, let us say you want to hold 100 public company shares in India. To do so, you will require a registered Demat account in India. A Demat account converts the securities into digital format and stores them securely in the account holder’s name. A Depository Participant (DP) registered with SEBI will facilitate opening a Demat account. Whenever you sell financial securities, they are transferred from your Demat account.
Besides opening a Demat account, traders in India must also register for a trading account. Since a Demat account can only hold securities, you need a trading account to buy/sell financial securities. Investors must use trading and Demat accounts in conjunction for a seamless transfer of securities. A reliable stockbroker cum DP like Religare Broking Limited can help you link the trading account to the Demat account. Some people believe an individual can only hold a single Demat account. Contrary to this belief, SEBI allows investors to open multiple Demat accounts. There is no limit on the number of Demat accounts an individual can open.
Understanding the merits of having multiple Demat accounts
- By opening multiple Demat accounts, you can work with different stockbrokers. For example, you can work with a full-service stockbroker for long-term investments. On the other hand, you can choose a discount broker for intraday and short-term investments.
- You can enjoy all the Demat account benefits by working with multiple stockbrokers.
- Working with multiple stockbrokers will give you access to all the public financial securities, IPOs, and government-backed securities.
- With multiple Demat accounts, investors can perform high-end research.
- Understanding the demerits of having multiple Demat accounts
- You will enjoy Demant account benefits but pay maintenance and transaction charges to multiple stockbrokers.
- Since you have to keep track of investment activities on multiple Demat accounts, portfolio management can become challenging.
You must keep making transactions from all Demat accounts frequently to avoid inactivity.
- Not all DPs offer Demat accounts at minimal or zero costs. You might spend more funds for opening multiple Demat accounts in India.
In a nutshell
Opening multiple Demat accounts has its pros and cons. While you enjoy more IPOs and securities, you will pay more maintenance charges for having multiple Demat accounts. Decide on having multiple Demat accounts after considering all the factors. After that, apply for a Demat account and begin stock market trading.
