Figures from the Association of Mutual Funds in India (AMFI) reveal that there were 80.3 million mutual fund portfolios in December 2018, almost all of these belonging to individual investors. Four million demat accounts were opened in 2018, a 13% increase over the previous year. That should give you a sense of how dematerialisation has democratised stock trading over the past few decades.

If you are looking to jump onto the trading bandwagon, demat account opening should be your first step. You can open a demat account with any registered depository participant (DP),many of whom provide the account free of charge to ease you into the system.

What is a demat account?

A demat account is used to store all your financial security certificates in one place. This account stores the certificates in electronic or dematerialised form. You are no longer required to hold physical share certificates which could be forged, stolen, damaged, or even lost.

The demat account brings other advantages as well. Transferring shares is easy,you can access the account from any internet-connected device, and the account works as a single-point reference for all your trades and investments.Securities in your demat account can be pledged as collateral when you apply for loans or engage in margin trading. Plus, corporate benefits like dividends and bonuses are added to your account automatically.

Demat account opening process: What you should know

To trade or invest on a stock exchange, it is mandatory to have a demat account. Demat account opening is an easy online process nowadays. Here is a step-by-step guide:

1. The right DP: The first step to selecting a DP is to understand your requirements. Full-service brokers and discount brokers provide different levels of service to their clients. Then there are other points to figure out,such as service charges and platforms offered. Choose a DP only after carefully evaluating the different firms and their service packages.
2. Demat account opening process: After selecting a DP, visit their website.Many DP websites featurea demataccount opening button. Click on the button to access thedemat account opening form.Fill in personal details like your name, phone number, and address. Then submit your account opening request. At this stage you may need to authenticate your phone number through a one-time password (OTP) sent to your mobile number.You can then continue filling up the rest of the form with your financial details like savings bank account number and Permanent Account Number (PAN).
3. Fee payment:Some DPs charge a demat account opening fee, but others provide the facility free of charge. However, you will need to pay the annual maintenance fee.
4. Documents:You will have to provide one documentary proof for each of the following:
   • Proof of address: passport, Aadhaar card, voter’s identity card, driving license, utility bills, bank passbook, address proof of the spouse, etc.
   • Proof of identity: passport, Aadhaar card, voter’s identity card, driving license, any other government-issued identity document, etc.
   • Proof of income: copy of income tax returns (ITR) acknowledgement slip, salary slip of current month,latest Form16, six months’ bank statement, etc.
5. Demat account details: Once the form is filled in and the fee paid, the DP will process your application and email the details to your email id.

Demat account number

Your demat account number is a 16-digit numeric or alphanumeric number. The type depends on which central depository your demat account is registered with.

A demat account issued by the Central Depository Services Ltd (CSDL) has a 16-digit numeric account number—for example, 1111222233334444. Meanwhile, a demat account issued by National Securities Depository Limited(NSDL)has a 14-digit number prefixed with IN—for example, IN00111122223333.

How does a demat account work?

If you want to start trading and investing in equities, the demat account cannot work alone. You must also have a trading account and a savings bank account. The bank account stores your money, the trading account enables you to buy and sellsecurities, and the demat account safeguards your security certificates. By linking your bank account to your trading account,you can transfer funds when you need to purchase stocks. If you sell securities via the trading account, the money is deposited in the bank account. On purchase of stocks, the certificates are sent to the demat account.

To make the process seamless, you could open a three-in-one account with a reliable DP like Kotak Securities.This would eliminate delays in the transfer of funds or security certificates, and enable you to make effective trades in real-time.