We live in a world where there is no dearth of avenues to invest our money in. Depending on your long term goals, risk tolerance, and investment preferences, you can allocate your funds into different financial instruments, including market-linked instruments.
Should you wish to invest in the country’s securities market, you must open a trading account and a demat account. Both the accounts can ve easily opened online by following a seamless process. There are, however, some common mistakes you must be mindful of during the demat account opening process. In this article, we shall discuss some such mistakes.
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Common Mistakes During Demat Account Opening
Before you embark on the journey of demat account opening, you must keep the following prevalent mistakes in mind, amongst others.
1. Not Conducting Sufficient Research To Choose A Credible Depository Participant
One of the most important decisions to take during the demat account opening process is the selection of the depository participant or brokerage house. It is pivotal to carry out adequate research to select a DP with substantial market credibility and a robust compliance record. You can easily find this information online, and choose a suitable DP.
2. Not Studying The Features Of A Demat Account Offering
In addition of selecting a credible depository participant, you must also ensure the selection of a demat account with the required features. During the demat account opening process, you must carefully study the features and benefits associated with different demat account offerings and opt for the account that aligns with your requirements.
3. Not Perusing The Schedule Of Charges Before Opening A Demat Account
Another key facet of the selection of a demat account is the charges associated with the account. It is important to go through the schedule of charges before selecting a particular demat account offering. Some of the prominent types of demat account charges are:
- Demat account opening charges
- Annual Maintenance Charges
- Dematerialisation and rematerialisation charges
- Custodian charges
- Account reactivation charges
4. Not Keeping The Required Documents Handy Before Opening A Demat Account
Before begining the process of online demat account opening, you must ensure that you have all the required Know Your Customer documents handy. In order to open a demat account in India, you must have an active Permanent Account Number (PAN) card, a valid proof of identity, recent passports sized photographs, a valid address proof, a proof of income, and active bank account details.
5. Not Checking The Particulars Filled In The Demat Account Opening Form
The information you fill in a demat account form forms the basis of the verification steps that follow the submission of said form. It is, therefore, critical to check all the information that you have entered in the form before going ahead with the final submission. Mistakes such as misspelling your name, entering an inaccurate date of birth or an inactive email address can be detrimental to the successful completion of the demat account opening process.
6. Not Perusing The Correspondence Shared By The Selected Dp
You must check all the correspondence received from the selected depository participant or brokerage house during the demat account opening process and following the account opening. The periodical account statements, reminders about due charges, etc., should be studied and any discrepancies therein reported on a timely basis.
The Bottomline
The advent of technology has made the demat account opening process time efficient and cost-effective. By being mindful about common mistakes that can derail your demat account opening endeavour, you can easily open a demat account and trading account in a hassle-free manner.
Frequently Asked Questions
1. What is the most common mistake people make when opening a Demat account?
The most common mistake is failing to research and compare different depository participants (DPs). Each DP offers varying charges and services, so not comparing options could lead to higher costs or inadequate features.
2. Why is providing accurate information during the account opening process important?
Providing incorrect or incomplete information, such as mismatched signatures or incorrect contact details, can delay the account activation and lead to verification issues.
3. How can ignoring the charges associated with a Demat account affect me?
Not reviewing charges like annual maintenance fees, transaction fees, or other hidden costs can result in unexpected expenses, reducing your returns over time.
4. What documents are required to avoid delays in the account opening process?
Ensure you have valid identity proof (e.g., Aadhaar or PAN card), address proof, a passport-sized photo, and a canceled cheque or bank statement. Missing or outdated documents can delay approval.
