Wondering what is required to start trading in stocks or to put money in Initial Public Offerings (IPOs)? Apart from the essential knowledge and money, what one needs is a Demat Account. With the growing awareness about stock market opportunities, more and more people are taking to stock trading. But it is not an easy game, especially for a novice investor who needs to play his cards right. It is very important for the person to understand the concepts of a demat account before taking a plunge.

What is a demat account?
Demat Account stands for a 'Dematerialised Account'. It is essential to get a demat account for trading as most trades nowadays take place in dematerialised form. It is an account opened with a bank or a broking firm to buy or sell shares or invest in exchange-traded funds. A demat account holds shares in dematerialised or electronic form. It is similar to a bank account, where shares are put instead of money.

What are the benefits of a demat account?

• It is a completely safe, secure and convenient way to trade in shares. It involves no paperwork.
• You cannot hold more than 500 shares in physical form, whereas in a demat account, you can hold an unlimited number of shares.
• Brokerage charges are less.
• It helps in easy settlement of ownership of shares and provides easy receipts of public issue (IPO) allotments.
• It is flexible; you get your money back by selling shares at the prevailing market price in three days compared to that in physical shares where it takes 15-20 days for settlement.
• There is no stamp duty like in physical shares.
• Information like change of address, bank details, signature, dividend mandate, etc., related to shares held can be changed by a single instruction to the broking firm.
• Transactions can be done over the Internet and telephone.
• Dividends, bonuses, rights issues, etc., are credited automatically to the account.

Who provides demat services?
Demat services are provided by banks, financial institutions, broking firms, NBFCs, etc. They are known as Depository Participants (DPs). Like a bank branch, you need to go to a DP to open a demat account. It acts as an agent between the depositories and investors. A depository is a kind of bank which keeps funds or securities of investors. Presently, there are two depositories in India - the National Securities Depository Limited (NSDL) and the Central Depository Services (I) Limited (CDSL).

How to select a demat service provider?
There are several institutions that offer demat services. A list of demat service providers and their addresses can be downloaded from the SEBI website. You can either choose a stock broker or a bank or a financial institution, depending on their charges. The charges normally vary across the industry, some of them are:

• Account Opening Charge
• Annual Maintenance Charge
• Transaction Charges
• Custodian Charges

Many brokers or institutions offer incentives to attract customers like waiving of the account opening charges or no annual maintenance charge. Moreover, if you choose the same bank you are holding an account with, your paperwork gets simpler as your personal information is already available with the bank.

How to open a demat account? Once you select a demat account provider, you can complete the formalities of opening an account which involves the following steps:

• Filling an account opening form.
• Enclosing relevant documents such as proof of your identity, address, savings account details along with a cheque and others, if any.
• Signing an agreement with the demat service provider.
• The demat service provider gives a schedule of charges under the heads such as account opening fee, annual maintenance fee, transaction fee, existing services tax fee and securities transaction tax (STT).

Once your demat account starts functioning, you will receive a unique Beneficiary Owner ID (BO ID) from your service provider. The ID will be a reference number that will be used in every transaction. Beneficiary Owner is an individual who enjoys the benefits of owning a security or who holds a demat account. You will also receive a Delivery Instruction Slip (DIS) book. It is similar to a bank cheque book. A DI slip is used to give instructions to the service provider to debit your account and credit the broker's account with the specific stock.

Conclusion
It is clear that without a demat account one will not be able to trade in stocks as per the SEBI rule. But it's just not this. Along with the convenience of buying and selling shares from the comfort of your home/office, it also brings with it an unmatched safety and security to your investment. Thus a demat account just not remains a trading option but becomes the necessity for all kinds of investors, whether a novice or a pro.