If you wish to invest in the securities market, one of the first steps you must take is open a demat account and trading account. Both these accounts are prerequisites for participating in the securities market in its present state. You can open a demat account and trading account online. In this article, we shall discuss whether it is possible to open multiple demat accounts in India, and the pros and cons of doing so.
What is a Demat Account
Before we discuss the notion of multiple demat accounts, let us discuss what a demat account is. Demat accounts have been designed to hold market-linked assets in an electronic form. Linked to a trading account, a demat account serves as an important cog in the operational framework of the securities market. You can choose from various demat account offerings of different depository participants based on your investment goals and budget.
Can There Be Multiple Demat Accounts For One Investor
A common question vis-a-vis demat accounts is ‘Can I have more than one demat account’. The answer is yes. You can hold multiple demat accounts in India. However, you can open only one demat account with a particular depository participant or stock broker. For example, if you have a demat account with DP ABC, you cannot open another demat account with them. You can, however, open a demat account with another DP.
Major Pros Of Holding Multiple Demat Accounts
There are some benefits of having multiple active demat accounts such as
1. Ability To Access Different Brokers’ Trading Apps And Features
You can benefit from the trading platforms and features offered by different stock brokers, including market reports and analysis of trends.
2. Bifurcation Of Different Types Of Investments
If you have multiple demat accounts, you can bifurcate your investments by asset class or function. For instance, you can use one demat account for investing only in shares and another for investing in bonds. Alternatively, you can demarcate one demat account for regular investments and one for investing in Initial Public Offerings.
3. Risk Wise Segregation Of Investments
With multiple demat accounts, you can also segregate your investments on the basis of the risk they carry. You can use one demat account to invest in high risk assets and another to invest in low risk assets. This way, you can efficiently manage your overall portfolio risk.
Major cons of holding multiple demat accounts
Holding multiple demat accounts is not without its fair share or cons, some of which are:
1. Time And Effort In Opening And Operating Multiple Accounts
You would have to invest time, money, and effort in opening each demat account. What is more is that you would be required to check each demat account regularly, keep it active, and identify discrepancies in statements, if any.
2. Multiple Demat Account Charges
Each demat account entails a host of charges. If you open several demat accounts, you will have to pay demat account charges for each of those accounts. You must be mindful of this cost before opening multiple demat accounts.
The Bottomline
Although it is possible to open multiple demat accounts in India, it is not advisable unless you have a specific need for multiple demat accounts – for portfolio diversification, for instance. Since each demat account carries several charges, you must only open the required number of demat accounts.
Additional Read: For more information about our business and services, feel free to visit our Google My Business page.
