If you’re an investor looking to start trading online, you need to know what dematerialization is and how it helps. Click here to find out the top 5 benefits.
Dematerialization, also known as demat, is the process of changing your material certificates over into electronic formats. It’s a step in the larger process of stock trading being changed into an entirely electronic process.
Prior stock transactions were recorded on physical receipts that were kept as a way to manage trades. Trading is becoming a much more seamless process in the era of electronics, and you should seek to dematerialize if you haven’t already.
If you’re not convinced, we’ll lay out some of the benefits for you.
Benefits of Dematerialization
If you’re looking to keep up in the fast-paced world of trading, factor these five things into your decision to dematerialize.
1. Much of Trading Is Now Done Online
Probably the biggest benefit to dematerializing is the increased access that you receive. The NASDAQ is the world’s second-largest stock exchange, and it is carried out exclusively online.
The market is home to over 3,000 of the world’s largest public companies and deals with almost 2 billion trades every single day. There are other online stock markets as well, and access to them is essential if you’re looking to trade remotely.
2. Electronic Trading Is Convenient
You have the ability to trade from the comfort of your own home, your walk to work, or anywhere else where you have access to the internet.
No one needs to be physically present anywhere during any transaction and you’re deemed the legal owner of your shares when you dematerialize. This means that your certificates don’t need to go through the company’s registrar.
3. There Are Fewer Errors
Physical paperwork is a breeding ground for errors. Mishaps having to deal with misplaced papers and unforeseen mistakes can be extremely damaging when dealing with stocks.
The likelihood of errors increases exponentially as more paperwork is introduced and the market keeps expanding. Operating online takes care of this problem and documents all transaction in the steel-trap memories of computer databases.
4. Transactions Are Immediate
Most of the mistakes that come from physical security trading are a result of the time and effort needed to move the document from point A to point B. Dematerializing virtually eliminates the risk of damage, theft or loss.
Not to mention, the transactions are made through a depository participant who acts as a middleman between traders and companies. This means that you as the trader don’t need to communicate with the companies you’re dealing with.
5. There Are Fewer Barriers to Entry
Another great thing about dematerialized accounts is that there’s not a lot holding you back from starting one. You can open an account without any current securities, and you don’t even need to have a minimum balance in your account.
Additionally, there are usually no fees for opening the account, and annual charges typically aren’t levied for the first year. If you’re interested in these benefits it’s important that you look around and find the best demat account for your personal interests.
Interested in Learning More?
It’s essential that every trader understands the market. Understanding dematerialization is part of that. It’s also important that they follow business trends, keep up on their industry, and make good decisions.
If you’re interested in keeping up on your market, hear it from the professionals. We have a large collection of articles and podcasts that go in-depth on the things that matter to you. You’d be missing out if you didn’t take a look.
