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How to Open a Demat Account | Best Beginner’s Guide to the Stock Market | Module 3

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How to Open a Demat Account | Best Beginner’s Guide to the Stock Market | Module 3

When it comes to investing in the stock market, the first question that comes to our mind is- How to open a Demat Account? For investing in the stock market, Demat and Trading Account are necessary. Investing is an essential thing when it comes to managing your money because it ensures your financial security. Some people like the traditional ways of investing such as fixed deposits, recurring deposits, physical gold, etc. and some people master the art of investing in stocks and gain handsome returns from the stock market.

Today we will see the difference between a Demat and a Trading Account and how you can open a Trading and Demat Account online.

What is a Demat Account?

A Demat account is nothing but a dematerialized account used to store financial securities such as stocks, bonds, etc. in electronic form. In India, Demat accounts are maintained by two depository organizations named National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

Mainly there are three types of Demat account-

  • Regular Demat Account

    Regular Demat account is for the Indian residents who are willing to hold the securities.

  • Repatriable Demat Account

    This account is for non-resident Indians, those who want to invest in Indian securities. This type of Demat account requires an NRE (Non- Resident External) bank account associated with it.

  • Non-Repatriable Demat Account

    This account is for non-resident Indians but this type of Demat account requires an NRO (Non-Resident Ordinary) account associated with it.

 

What is a Trading Account?

If you are willing to invest in the stock market then it is not possible to directly connect with the exchange and buy the shares. First, you have to open an account with the broker, and through the broker you can buy or sell the securities. The account which you open with the broker for buying and selling securities is called a trading account.

There are different types of brokers such as-

  • Service Brokers

  • Discount Brokers

Service brokers provide a wide range of services for their clients that includes buying/selling of shares, stock research, stock buy/sell recommendation, etc. For this, they charge more than the discount broker.

Discount brokers only provide trading services to their clients. That is why they charge less than service brokers. Zerodha and UpStox are India’s best discount brokers. The interfaces of Zerodha and Upstox are very user-friendly, and you can buy/sell the shares through them very easily.

Steps To Open A Demat Account Online

1. Choose Your Broker – This is the first and very important step while opening a trading and Demat account. You need to open your Demat account as well. For this purpose, you should choose a SEBI registered broker having a valid registration number issued by SEBI.

2. Visit The Broker’s Website – After selecting the broker, visit the official website of that broker and register yourself by using your phone number. (Make sure that your phone number has been linked to your Aadhar.)

3. Fill In The Necessary Details – After the successful registration, the broker will ask you to fill in the primary information like your Email Id, PAN Number, Aadhar Number, Occupation, Date of Birth, etc.

4. Upload The Required Documents – After filling in the required information, you have to submit the following documents-

  • PAN card
  • Aadhar card
  • Canceled Cheque/Bank Passbook/Bank statement (1 month)
  • Your signature on white paper
  • Income proof (optional – if you want to trade in F&O)

5. Link Bank Account – After uploading these documents, you have to fill in your bank account details.

6. In-Person Verification- In-person verification is the mandatory step according to the rules and regulations of the SEBI. In this step, the broker will give you an OTP, and you have to write down that OTP on paper, and you have to hold that paper in front of your webcam.

7. E-Sign The Application Form – After completing the in-person verification it will ask you to e-sign the application form. Once your email verification is done, you will be redirected to the NSDL page on which you have to provide a 12-digit Aadhar number. After that, confirm the OTP that will be sent to you through your Aadhar registered mobile number.

Once you are done with this, the application form will automatically open in front of you along with the e-sign option. Once you click the e-sign option the process of account opening for the equity segment will be completed. If you have chosen the commodity segment also in that case, you have to repeat this step.

8. Get Your Client ID And Password- This completes the process of opening the trading and Demat account. You will receive your login credentials and client ID through the mail after verification of the provided documents. The mail will also contain some instructions regarding how to log in and use the broker’s app.

    I hope that in today’s lesson I was able to explain to you the difference between Trading and Demat Accounts and how you can open a trading and Demat account to invest and trade in the stock market. If you have any queries regarding today’s topic please post them in the comment section, I will definitely try to resolve them.

    Know more about the basics of the stock market, from our previous blog of the series,
    “Best Beginner’s Guide to the Stock Market | Module 2 | All about stock market indices”.

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