Equity has grown in popularity as a product among investors due to the tapering of returns from several investment products in recent years.
Over the years, a steady increase in new Demat accounts has been observed.
The Securities and Exchange Board of India has made it mandatory for all investors to have a Demat account number to make it simpler for stockbrokers and investors to assess their investment portfolios.
Instead of the account holder’s name, each account is identifiable by a unique number called a Demat account.
How Does A Demate Account Work?
When shares or other securities are sold, the account is debited. You must link your Demat account to your trading and savings accounts to engage in equity and securities.
One can save money in electronic form in a savings account, and an investor can keep securities in a DP’s (depository participant) Demat account linked to the NSDL or CDSL.
Demat account functions similarly to savings account at a bank.
Also Read: Axis Bank Demat Account – Should you try it?
Can One Have Multiple Demat Accounts?
Multiple Demat account opening is not restricted by the market regulator’s Securities and Exchange Board of India.
You may create numerous Demat accounts. Your ability to open an unlimited number of Demat accounts is unrestricted. Before opening several Demat accounts, you should know a few factors.
All Demat accounts must be linked to your Permanent Account Number. You cannot open more than one Demat account with a broker since an investor can only open one account with a DP or broker.
You can sell or buy shares of a trading account, whereas a Demat account allows you to keep shares electronically.
The total number of Demat accounts a shareholder may open is unrestricted.
Why Open Multiple Demat Accounts?
Every Demat account is attached to a PAN card; as a result, any equities you invest in will be seen as your investment because of this connection.
It should be noted that you may open one Demat account with one broker. You need to contact a different broker if you want to open a second Demat account.
We use multiple Demat accounts to store money in various accounts, which helps us diversify our investments.
We use multiple savings accounts to save and invest our money. Demat account functions similarly to savings account at a bank.
Things to remember to open multiple Demat accounts
- Opening several Demat and trading accounts are entirely legal. There is a restriction tied to it, though. You are not permitted to open more than one Demat account with the same broker or Depository Participant (DP). You cannot open another account with a DP or broker if you already have a Demat account or a trading account with them.
- If the Demat account is not used, fees may apply, and it could be frozen. Such accounts are subject to penalties for reactivation. Watch every transaction that occurs on all of your Demat accounts. You must once again complete your eKYC in order to reactivate it.
- You will be charged separately for annual maintenance on each account you have. Even if your Demat account is idle and no transactions are being made, the DP will still charge you this sum. The annual AMC fees are between Rs. 700 and Rs. 1000. You need to be informed that each Demat account you open will require payment of the AMC.
- You can access a variety of trading products, trading platforms, brokerage, research reports, etc., with several Demat accounts. You can use the services of many brokers by setting up multiple Demat accounts. Since each broker is unique in their own right, their services will differ.
- The holdings in the Demat account are not under the jurisdiction of the stockbrokers or DPs. Your shares are owned by a depository when they are kept in a Demat account. India now has two depositories: Central Securities Depository Ltd. And National Securities Depository Ltd. (CDSL). Keeping your shares with stockbrokers is quite safe if you have several Demat accounts.
- You may easily separate your investing portfolio from your trading portfolio by opening numerous Demat accounts and different trading accounts. Having multiple Demat accounts is quite beneficial if you participate in the stock market as both a trader and an investor.
Advantages Of Multiple Demat Accounts
Better Portfolio Segregation
People who engage in the stock market buy various products, including equity shares, initial public offerings (IPOs), cash, commodities, ETFs, mutual funds, etc.
People who engage in the stock market buy various products, including equity shares, initial public offerings (IPOs), cash, commodities, ETFs, mutual funds, etc.
You can organize different shareholdings more easily if you have many Demat accounts.
For simplicity of management, your investments are organized into different accounts. Because you can use one Demat account exclusively for one purpose, having many Demat accounts is advantageous.
You could find it challenging to track the performance of each instrument if you only have one Demat account.
Safety
Since they are safely maintained in your digital account under CDSL or NSDL supervision, your shares or mutual fund units are always safe.
The Indian government is in charge of CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited).
Users with several Demat accounts with different brokerages can use a variety of interfaces and add-on services from both brokers.
Even though brokerage firms rarely fail or cease business, the possibility exists.
It is essential to have many Demat accounts because doing so reduces your risks by distributing your assets across different brokers.
Better Insight
The ability to buy and sell equities from various angles is another benefit of having many Demat accounts.
As a capital market investor, you must stay current on market developments; the more you know, the more you can advance.
Therefore, numerous Demat accounts expose you to a wealth of knowledge and understanding-enhancing information.
This can be done through research, access from various stockbrokers, or even through the user interfaces that brokerage firms employ.
Brokerage companies typically release research reports and provide registered clients with free stock/mutual fund recommendations.
You can view the recommendations or research reports of various DPs or stockbrokers if you have different Demat accounts.
Amit Gupta is the creator of FreeDematAccount.in, a website that specializes in Demat accounts and provides assistance to all its users in navigating through complicated decisions. After completing his high school certification, Amit spent half a decade learning about Demat accounts from brokerages. Before forming FreeDematAccount.in, Amit worked for a Demat account brokerage.