The enormous growth we’re witnessing in our economy finds an obvious indicator in the stock markets. Presently, after understanding the dynamics of the share markets, mutual funds and more, an increasing number of people seem to be more inclined to invest big in these markets.
But can everyone jump in? Only if they have a dematerialized account.
Key Points
- In India, there are two depositories that hold your demat account for you. These are the CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited).
- Contrary to what you may assume, you don’t need to be 18 to get started. There is no minimum age to invest in the stock market.
- A PAN card is a necessity to get started with your online stock trading.
It is important to know if you’re eligible to open a demat account in the first place.
How does a Demat account work?
A dematerialized account holds all your securities (shares, commodities, ETFs etc) in an electronic form. You cannot trade in the stock market without one. Let’s get the basics out of the way first. Here is a list of things to understand the working of this account:
- Central Depository: In India, there are two depositories that hold your stock accounts for you. These are the CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited).
- Unique ID: Every dematerialized account has a unique ID for identification. This number is not only used for transactions but also helps individual companies to identify you correctly in order to credit shares into your account.
- Depository Participants: Access to your stock account, held by the central depository, is provided by Depository Participants - DP, or what we call brokers. They act as an intermediary between the central depository and the investor. DPs could be traditional banks, financial institutions or more recently, discount brokers.
- Portfolio Holding: A stock holding account contains all the details of the accounts’ transactions. They are automatically updated every time a transaction occurs.
CDSL was set up in 1999 to help manage the rush of demat account registrations that the NDSL was dealing with.
Eligibility Criteria
Age
Contrary to what you may assume, you don’t need to be 18 to get started. There is no minimum age to invest in the stock market. Both a minor and an adult can invest in stocks.
An account can be opened in a minor’s name by the parents or the appointed guardian after submitting their respective documents. The parents or the guardian/s will be in charge of the account until the minor attains adulthood.
Post the minor turning 18, the depository participant will send an advisory to the individual in order to obtain certain KYC (Know Your Client) documents to open and transfer details to a new account.
PAN and KYC details
A PAN card is a necessity to get started with your demat account. You’ll need to submit a copy of your PAN card along with the KYC document when opening the account.
The KYC process is witnessing a shift to an online format that uses your Aadhaar card. It is Upstox’s most popular method of registration. You too can do your eKYC online.
Documents required for a demat account
To be eligible for a dematerialized account; in addition to your PAN card, you must provide a few more documents for identification and address proofs along with your latest photographs. Only photocopies of the documents are required for submission. However, the originals will be required for verification.
- Proof of identification (POI): A voter’s ID, a PAN card, a passport, a driver's license, electricity bills, telephone bills, ID cards with applicant's photo issued by the central or state government are a few documents which can be submitted for proof of identification.
- Proof of Address (POA): Ration cards, passports, a voter ID card, a driver’s license, a bank passbook or a bank statement, verified copies of electricity bills, residence telephone bills are a few of the documents which can be submitted for address proof.
Wrapping Up
- In a booming economy, the stock markets are the best places to begin investing. To get started though, you need a dematerialized account.
- Anyone regardless of age can open a stock account, by submitting her/his PAN card, ID and address proofs, and filling out a KYC form.
- Your brokerage verifies your documents and executes the process of opening an account. A client ID is generated after the process which can then be used for future transactions.