Dos And Don’ts For A Demat Account

An online Demat account is one of the primary elements of the entire financial journey. Depository participants have a variety of Demat account options available. The investor should decide the type of the Demat account as per the budget and requirement. 

Demat History 

Earlier, companies used to issue physical copies or certificates for the shares of the company. Till the late 1990s, there was no digital framework available for the Indian stock markets. Exchanges are used to overlook the operations of physical equity shares of the company. Investors, traders, and exchanges had to face a lot of forgeries, sign-mismatch, and other such issues with this system. 

The system was replaced during the liberalization period when multiple Multinational Companies (MNCs) were allowed to set up units in the country. The Government of India tied up with exchanges and companies to remove the old system and introduced a new mechanism to transfer physical shares into dematerialized (Demat Full form) form. Even the IPO investment was floated digitally after Demat accounts were introduced.  

What is a Demat Account? 

A Demat account is a statement for all the financial securities ever bought and sold by an investor. It holds the record of all the financial activities. The Demat account eliminates all the issues that traders, exchanges, and companies used to face in the earlier traditional system. 

Demat accounts can be used to trade in all types of financial instruments including equity shares, bonds, commodities, foreign currencies, and many more. 

Digital Demat account opening depends on the broker. Not every stockbroker provides an option to open a digital Demat account. Some of the brokers require the account holder to be present in front of them to get the Demat account opened. 

Once you are done with opening a Demat and trading account with the broker, you need to be conscious and aware of the usage of the Demat account. Below are some of the dos and don’ts of a Demat account: 

Do’s of Demat Account 

  • A non-active investor should look at the demat account statements at least quarterly. It makes it easier for him to analyze the portfolio. Also, if there is any discrepancy, it should be reported to the broker or the depository. 
  • Keep a regular check on the Delivery Instruction Slips (DIS). The account number should be pre-stamped.  
  • Always provide updated contact information to the demat account provider. By giving the Power of Attorney (POA) to the broker, investors give them the right to sell or buy shares on their behalf. Therefore, to stay alert, check your contact information regularly with the broker. 
  • To prevent the misuse of any information from the demat account, you can freeze it. It is better to freeze a demat account you are not using, when you have more than one demat account. 
  • To save yourself from any trouble, look thoroughly while taking a buy/sell position.  
  • Always double-check the amount, margin percentage, and other such information before placing an order. 

The ISIN number has to be cross-checked every time before taking any position. 

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Don’ts Of Demat Account 

  • Do not keep signed documents with a friend or at the broker’s office. It is risky to jeopardize your demat account details. 
  • Avoid transacting in offline shares with other unknown demat accounts. The Securities Exchange Board of India (SEBI) overlooks such details. In case you do so, you can get a notice from SEBI on account of suspicion. 

It is safe and easy to transact with the Demat account. However, investors need to choose a trusted and genuine stockbroker who is registered with SEBI to avoid Demat-related mishaps. A suitable stockbroker is one who offers more services and charges less fee for them.   

Also read:- Forex Trading Tips: How to Plan for Success and Get Up from Struggle

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