Why Do We Need Demat Accounts?

Posted In India, Stocks - By NitiN Kumar Jain On Thursday, December 9th, 2010 With 2 Comments

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I know most of us still think that Demat Accounts are only mandatory for buying shares or applying for equity IPOs. But you may be surprised to know that, today, a Demat account is not only required for trading in the share market but it is also required for the following investments:

  • Popular Mutual Funds – Buy from our NSE terminals and maintain them in your Demat account (optional).
  • Corporate Bonds / NCDs – Like Tata Capital, L&T Finance, Shriram Transport, SBI Tier 2 Bonds. (Demat account is mandatory)
  • Gold ETFs – Easiest and cost effective way to invest in Gold . (Demat account is mandatory)
  • Long Term Infrastructure Bonds / Sec.80-CCF – Like IDFC Bond and L&T Infrastructure Bond ( optional ).

Another important thing to note here is that you can have as many number of Demat accounts as you want (similar to owning multiple bank accounts)

As more and more investment instruments are coming under Demat route, you may find it difficult to maintain everything in a single Demat account. So you may like having multiple Demat accounts:

  • A Demat account only for equities where there will be frequent transactions.
  • Another Demat account exclusively for passive investments like MFs, Bonds, Gold ETFs where there are rare transactions.

In short, today, Demat Account has become inevitable for any investor. Hope you already have at least one Demat account.