Market-linked financial instruments have always been one of the most prominent investment options across the globe, and India is no different.
With the advent of digitalisation and the streamlining of the trading process, it has become convenient for people to participate in the market and buy a wide array of financial assets, ranging from shares to mutual funds.
In order to invest in the securities market, a demat and trading account is required. In this article, we shall discuss what is a demat account and trading account, and how to purchase shares through these accounts.
What is a Demat Account
A demat account is an account where the securities purchased from the market get stored. The actual purchase and sale of securities takes place through a trading account; this account serves as the conduit between investors and stock exchanges for the placement, matching, execution, and settlement of orders.
You can open demat account and trading account with separate brokerage houses or opt for a combined demat and trading account from the same brokerage house.
Process to Buy Shares Through your Demat and Trading Account
Now that we have discussed what is demat account, let us delve into the process of purchasing shares through a demat and trading account.
1. Ascertain your investment goals and plan
Firstly, you must determine your investment goals and what types of assets you wish to invest in in the market.
Furthermore, you must gain clarity on the amount of risk you are willing to undertake in your market-linked investments and the time for which you wish to invest in a particular type of security.
Having clarity on the aforementioned facets is pivotal to choosing the right type of trading and demat account, and making the right investment choices for yourself.
2. Select a brokerage house to open a demat and trading account with
Once you have clarity on your expectations from a demat and trading account, you can assess and compare the demat and trading accounts offered by various credible stock brokers.
While gauging such offerings, you must consider several parameters, including account features, cost, efficiency of the trading platform, past compliance record of the broker, etc.
3. Complete the demat and trading account opening process
After selecting a stock broker, you can proceed towards opening a demat account and trading account with them. To do so, you must visit their official website and fill the online demat and trading account opening form.
Furthermore, you must submit digital copies of the required documents, including your PAN card, valid proofs of identity and address, bank details, and recent passport size photographs.
4. Access your newly opened demat and trading account
After your demat and trading account has been opened, you shall receive the login credentials for the account. You can access the broker’s official trading platform and log in to your demat and trading account.
5. Select shares to add to your investment portfolio
In order to start investing in shares, you must carry out adequate research. You can invest in the stock of companies you prefer (after studying their past performance and fundamentals) or particular sectors.
There is substantial information available on the leading stocks in various sectors, and you can peruse said information to make rational investment choice that align with your overall investment plan.
6. Add funds to your trading account
The next step is to add funds to your trading account so as to place the purchase orders in the market. When you open demat account and trading account, your bank account gets linked to the former. You can transfer the required funds to your trading account after assessing the market price of the shares to be purchased.
7. Place purchase orders for the selected shares
Once your trading account has sufficient funds, you can place the purchase orders through the broker’s trading platform and buy the shortlisted shares. The shares thus purchased would get credited to your demat account after the completion of the applicable settlement period (T plus one days).
8. Monitor your investment portfolio
You can access your investment portfolio at any time and check how much gains/ losses have been generated on various assets. It is possible to purchase more assets (shares or otherwise) and sell existing assets as you deem fit.
The Bottomline
With a demat and trading account, you can easily purchase shares and other market-linked assets. Since the entire process is paperless and seamless, you can save a lot of effort, money, and time. It is advisable to check your demat and trading account on a regular basis and never share your account information with anyone.
