Your Demat account is the first step of what I hope will be a very long, and fulfilling journey.

Rupee Rani Want to start investing Opening a Demat account is the first step
Money Rupee Rani Tuesday, September 19, 2017 - 11:06

Ever since I started writing this column, I’ve been getting a lot of women write to me about “getting started” with investing. When you haven’t invested previously, the very task of setting yourself up to invest might seem daunting enough to give up altogether. However, if you are armed with the knowledge of what you’re getting yourself into, the process does become easier, because you become more confident in expressing what you need. And when you’re confident, you cannot be intimidated. 

What is a Demat account?

If you want to start investing, the first step you need to take is to open a Demat account. The ‘Demat’, stands for ‘de-materialised’. So before the advent of the internet, when people wanted to invest in the shares of a company, or a Mutual Fund, any other financial instrument, they had to get physical copies of these instruments in order to prove their claim as an investor. So if you were an investor in the good old days, you’d have had to dedicate an entire shelf to storing these papers safely and categorically, and you’d have also needed to quit your day job because of the amount of time that active investing consumed. 

Thankfully, none of this is necessary now because of Demat accounts, which hold all your investments online. 

Where can I open a Demat account? 

You have to open a Demat account with a Depository Participant.  Think of Depositories as banks, but for your investments. So the way investing works in India now, is that there are two main Depositories—the National Securities Depository Limited (NSDL), and the Central Depository Services Limited (CDSL). These two Depositories are registered with the Securities Exchange Board of India (SEBI), and are authorised to hold securities/investments on behalf of the investor (you), in dematerialised form. They do this through Depository Participants, who act as their agents.

Essentially, you can open a Demat account only with the NSDL or the CDSL, but in order to do so, you need to go through Depository Participants like banks, or financial institutions. You can open your Demat account through the same bank where you have your primary bank account. If you know a stock broking company (for example, Kotak Securities, Motilal Oswal, Karvy etc), you can also open a Demat account through them. 

What do I need to open a Demat account? 

You need the same set of documents that are required for opening any account these days—proof of identity, proof of address, your PAN card (which can also be used as proof of identity), and details of your bank account. These days, depository participants have also started asking for Aadhar. 

What do Demat accounts cost? 

Most Depository Participants do not really charge anything for opening the account, but there will be annual maintenance fees that vary from participant to participant (all the more motivation to not stop with just opening the account!).

I’ve opened a Demat account, now what?

Start right away! Once your account is registered with the NSDL, all you have to do is to quote it (along with your Depository Participant’s ID) every time you want to buy/sell an investment. Every Mutual Fund today has forms that you can fill online to purchase. You might have to fill an extra Know-Your-Customer (KYC) form the first time you buy, but after that, the process is really breezy.

The journey of a thousand miles begins with the first step. Your demat account is the first step of what I hope will be a very long, and fulfilling journey. 

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