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Many individuals often find investing to be a challenging journey. Potential investors and traders must take some time and reflect before diving into the daunting world of investing. However, with easy access to trustworthy information and financial portals, investors and traders may discover solutions to their questions. When individuals begin their investment adventure, they must first create a Demat account.
This account is used to keep investments and assets in electronic form once an investor or trader completes a transaction. The Demat account is linked to a trading account and bank account. Therefore, it provides an efficient and easy experience for trading, investing and keeping assets.
New traders have numerous questions on their mind while beginning their trading journey. Among the many questions, you might wonder about the pros and cons of opening multiple demat accounts. Find your answer here below.
What is demat account?
Dematerialised Account is the full form of the Demat acronym. Demat is a type of online portfolio that stores the shares and other securities of a customer. It has eliminated the need to possess and trade actual share certificates.
A Demat account stores shares and securities electronically. These accounts may be used to create a portfolio of bonds, ETFs, mutual funds, and stock market assets.
Features of demat account
Below are key features clarifying the meaning of a demat account:
- Convenient access to investments and statements via net banking.
- Depository participants facilitate conversion between physical and electronic certificates.
- Automatic crediting of dividends, interest, and refunds, with ECS for updates on stock splits, bonus issues, etc.
- Simplified and time-saving share transfers.
- Expedited cash retrieval through share sales.
- Option to secure loans against held securities.
- Ability to freeze specific securities temporarily, preventing transactions via debit or credit cards.
Things to keep in mind before opening multiple demat accounts
Today, opening a demat account is as straightforward as opening a savings bank account. However, you should consider the following.
- You can only open one demat account with each broker. To open another, you must approach a second broker.
- Multiple demat accounts might help traders arrange their investments. Demat accounts may be used for trading and investing separately.
- Currently, India has two depositories including National Securities Depository Ltd and Central Depository Services Ltd. Your securities are stored with NSDL and CDSL. As a result, even if you acquire your shares through brokers, they have no control over your demat account holdings, ensuring the safety of your stocks.
Can you open more than one online demat account?
How can I open multiple demat account online? And can an individual with an existing Demat account open another one under the same name? The straightforward answer is yes. If you currently have a Demat account and desire to open another, there are no restrictions. In fact, there’s no limit to the number of Demat accounts you can possess simultaneously.
However, before proceeding to acquire multiple accounts, it’s crucial to grasp the implications. Holding multiple accounts entails responsibilities for the account holders, including associated charges. If you choose to open more than one Demat account, you should be prepared to cover any associated costs.
Why open more than one demat account?
Can I open multiple demat accounts? A Demat account operates akin to a savings bank account, offering the flexibility to store and invest funds. Similar to how individuals maintain multiple savings accounts for various purposes, having multiple Demat accounts enables diversification of investments across different accounts. This diversification becomes especially beneficial when managing various types of assets, allowing for organized storage within segregated Demat accounts.
Each Demat account is linked to a PAN card, meaning every investment made is associated with the PAN card holder. Additionally, it’s important to note that one can only open a Demat account with a single broker. To open a second Demat account, one must engage with a different broker. Thus, when considering the question of how many Demat accounts one can open, it’s essential to recognize the necessity of dealing with multiple brokerages.
Advantages of multiple demat accounts
- Owning multiple Demat accounts offers the advantage of trading in various assets while maintaining a clear overview of your transactions. You can allocate different assets to separate Demat accounts, such as one for mutual funds, another for Future and Options (F&O), and yet another for delivery trade.
- Each stockbroker comes with its own set of advantages and disadvantages. Engaging with multiple brokerage firms allows you to access diverse insights and market news, enriching your trading experience. Furthermore, brokerage firms offer distinct charts and stock analyses, contributing to your market knowledge and facilitating informed decision-making.
- Diversify your investment opportunities by utilizing multiple Demat accounts. For instance, if you intend to invest in Initial Public Offerings (IPOs), you can utilize one of your Demat accounts solely for upcoming IPOs. Segregating investments across multiple Demat accounts enables efficient management and enhances your investment capacity.
Disadvantages of multiple demat accounts
- Holding multiple Demat accounts provides the flexibility to trade across a range of assets while maintaining a clear record of your transactions. You can allocate different assets to separate Demat accounts, such as one dedicated to mutual funds, another for Future and Options (F&O), and yet another for delivery trade.
- Each stockbroker presents its own advantages and drawbacks. By working with multiple brokerage firms, you gain access to varied insights and market news, enriching your trading experience. Moreover, brokerage firms offer unique charts and stock analyses, which contribute to your understanding of the market and support informed decision-making.
- Expand your investment horizons through the use of multiple Demat accounts. For instance, if you plan to invest in Initial Public Offerings (IPOs), you can designate one of your Demat accounts exclusively for upcoming IPOs. By segregating investments across multiple Demat accounts, you can effectively manage your portfolio and enhance your investment capabilities.
Bottom line
Having several Demat accounts can offer advantages, albeit with accompanying extra expenses. Maximize the potential of your Demat accounts by weighing the aforementioned pros and cons. If you’re contemplating opening a new online Demat account swiftly, visit the m.Stock website for a seamless onboarding experience, zero brokerage charges, and rapid KYC verification to initiate your trading journey promptly.
FAQs
According to SEBI guidelines, there is no restriction on the number of Demat accounts one can open. However, opening multiple Demat accounts with the same brokerage firm is not permitted.
NSDL and CDSL are prominent depositories in India. You have the option to open a Demat account with either NSDL or CDSL. Both depositories function similarly, and you can conduct trades through any of them with a broker such as Share India.
Indeed, managing multiple Demat accounts can result in increased administrative expenses, as investors are required to oversee and monitor each account individually. Furthermore, there might be charges linked to account opening, upkeep, and transactions for every account.
Beginner investors or individuals with uncomplicated investment requirements might discover that handling a single Demat account is more convenient and economical.
Investors have the option to acquire shares in physical form through application. Nevertheless, opting for an IPO in dematerialized form is preferable, as the shares issued are exclusively tradable online.
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