INTRODUCTION-
The simple answer to the above question is: Yes, you can have multiple demat accounts in India. It is a legal practice in India and so you won’t have to face any legal problems. Similar to how you can open and maintain deposits in more than one savings account in different banks, it is also possible to have multiple demat accounts with different brokers in India. A stock market trader or investor can own as many demat accounts as she/he requires. You can have one demat account with Upstox, another with Angel One, a third with Zerodha, and others with any brokers that the investor prefers.
As the global pandemic affected the Global economy in numerous ways, it has immensely impacted the stock/securities market and international stock indices across the world. The stock market indices, trading platforms and brokers have seen a rapid increase in the new accounts that are opened with them by brand new retail-investors & traders who began trading in the share market as a result of the pandemic-induced lockdown and to find a way to earn a separate income from salaried jobs.
Retail investors have grown in a considerable high sizeable amount, as fears of harmful viruses and global pandemic which has people losing their jobs and pose a high risk on their secure financial future, the people start to be acceptable of the fact that such pandemics are unavoidable as they spread and the best you can do is to take all precautions for both physical health and financial health wise whilst sitting at home, to balance out risk of losses. More and more people started to invest in the market as having their investments generating returns for future use can be beneficial to them in more than one way to gain a return on the invested capital.
The first and foremost requirement to access the securities market is a Demat account with a depository participant, which is usually your stockbroker. There are several of discount brokers available online that offer the new investors to open a Demat account and trade while charging them the minimum charges. However according to the preference of the investor there is also the option of a full-service broker which will not only offer you to open a Demat account and trade on the share market, but will also offer you various financial services for your investments with an additional cost. As we have learnt above, individuals are allowed to open multiple Demat accounts with multiple brokers, which allows them to have multiple Demat accounts under their name, they also have a limitation of being permitted only one single Demat account per Depository Participant.
However, investors who opt to open multiple Demat accounts also have to keep in mind the higher risks involved with maintaining multiple demat accounts. There are several reasons for one investor to do this, but this decision comes with its own drawbacks and increased risk of losses, if the multiple demat account holder is not well versed with operating multiple Demat accounts.
WHAT IS DEMAT ACCOUNT?
Demat account is short form for dematerialisation account. In finance dematerialisation means a process in which a client can get physical paper form securities converted into electronic securities/balances. A Demat Account can be a bit similar to a bank account to maintain and hold your share certificates and other securities that you have invested in a digitalised electronic format.
Back when there was no digital platform for stock trading, stocks and shares used to be bought and sold exchanged through physical receipts called certificates. The outcome and aftermath of this was shown in lengthy paperwork to be done by hand which wasted a lot of time and the processing of the documents took a considerable amount of time but errors were also more frequent. To solve this issue and to make the process more effective and efficiently done through the use of an electronic online trading platform which was becoming more common slowly in the Western parts and the Asian Markets, this process of dematerialisation of shares was first established in 1996. Physical paper share certificates were soon transferred and converted into electronic form of securities of the equal price and number and after the full digitalisation process were credited to the investor’s demat account. Hence making the trading practices a whole lot smoother, quicker and secure for the investors.
The process of investing in the share market has been made easier through the introduction of Demat Account. Demat Account makes investing in and Holding of investment securities such as bonds, shares, government securities, Mutual Funds, ETFs and insurance hassle free and easier, by converting the process entirely online and electronic. Eliminating the inconvenience of processing physical paper forms, documents, paper shares.
PROS OF OPENING MULTIPLE DEMAT ACCOUNTS-
1. One can open multiple demat accounts with different brokers in order to set apart the short-term and long-term investments. For example, in case of short-term investments an investor opens a Demat account with a broker that offers low transaction fees due to the total net trades being higher, the transaction fee will be charged on every transaction. Hence it will prove beneficial to opt for a broker with low transaction fees for short-term trade purposes. While on the other hand for long-term investments an investor can opt to open a Demat account with a broker that offers lower account maintenance charges for the long term investments, as due to the term being long investor is likely to hold on to his investments, and not transact them as much.
2. Opening multiple Demat accounts also helps in diversifying & widening investor’s portfolios, offering more credibility. In case the investor wants to invest in an IPO, & the allotment of the IPO is not available to the general investors, this is where a more diverse portfolio having multiple Demat accounts will more likely get you an investment opportunity and ease the selection for your portfolio for allotment. This advantage is also applied when dealing with some government securities.
3. Easy to manage- If an investor has multiple Demat accounts, it helps in classifying & sorting, plus efficiently managing different types of investments, it can be short- term investments or long-term stocks. A trader can opt to invest more often traded stocks with a discount broker while investing the long-term investments with a full-service broker.
4. Best of Both world- With multiple demat accounts, a trader can get the benefit of getting the best of both worlds, by incurring full benefits of full-service stockbroker and a discount broker. It gives traders access to various interfaces also with the added services provided by a full-service broker. Based on the trader’s requirements, they get the benefit from the various interfaces offered by different brokers.
5. Safety and security- Another pro of having multiple demat accounts is that the digitalisation of the securities in an electronic format provides a safe and secure interface of storing. It is much safer and puts an end to the hassles associated while dealing with physical paper documents & reduces the risk of fraud.
CONS OF OPENING MULTIPLE DEMAT ACCOUNTS IN INDIA-
1. You will be charged for the Multiple Annual Maintenance Charges (AMC) for different demat accounts
Opening multiple accounts will obviously increase the charges on the annual maintenance, there is an increase in charges relating to the multiple demat account that you have to pay. Even though you can open the demat account free of charge there is more possibility of an annual maintenance charge for the account to be paid. It has another downside that the transaction fees are also charged every time a trade is made. Hence, if you have multiple Demat accounts which you operate and trade through, then you need to pay higher transaction and maintenance fees, which can reduce the profits you make through your trading.
2. It can get difficult to keep track of and manage multiple demat accounts-
Another con, when considering the cons of a Demat account, is that each Demat account will require individual effort, time and attention. The downside of having multiple Demat accounts is that you will have to increase your time investment into managing the multiple demat accounts. It creates a complication when a trader has a full time 9-5pm day job or if the investor is looking to be a full time investor for when the market is active during the day till afternoon. A considerable amount of time needs to be dedicated to the stock market to make the trades profitable, in case of multiple demat accounts the amount of time which needs to be invested and given to the stock market doubles which can create inconvenience. The Operating of the multiple Demat accounts also requires bookkeeping skills from the investor due to the various information and reports on monthly, quarterly, and annual statements. Time required for trading can become an issue for most investors. Managing multiple demat accounts can consume a lot of time and it can also get exhausting. To make a profitable move, an informed decision regarding investments has to be made for which the trader has to be consistently active and be updated on the multiple news or various factors including chart indicator stock price fluctuations the right time for buying and selling the shares. To fulfil the responsibilities to manage the multiple demat account, one requires commitment given to the stock market trading.
3. Inactivity can lead to the account getting freezed-
When managing multiple demat accounts gets overbearing and investors neglect the account for a very long period of time and stay inactive for an elongated amount of time, their demat account can get freezed. And the stocks and securities which are stored in the account, the demat shares are safe with NSDL or CDSL and can be recovered. But to avoid your depository participant freezing your demat account and causing any inconvenience you should stay active on the account timely.
Conclusion- While it is possible to have multiple demat accounts under a single name with different brokers it is only a smart strategic move if the trader is an experienced investor so that he can manage the multiple demat accounts without many drawbacks. As calculated decisions and moves are required to be made at any crucial time in the volatile and dynamic market the trader/investor should have their ears perked up and mind at ready to make some profitable trades. Different depository participants have various pros and cons of demat account, which can be utilised to maximise returns. However if the owner of the multiple demat accounts is unable to operate and keep track of the demat accounts, it can lead to lower returns and increased charges. In a more generalized manner a trader should work towards reaping and optimising the benefits and gains from one single depository participant and one demat account for efficient investment returns and effective control. An investor should weigh the pros and cons of having multiple demat accounts and make the move according to the profitability of their investment plans and after assessing if having multiple demat accounts is the right move for them.
The simple answer to the above question is: Yes, you can have multiple demat accounts in India. It is a legal practice in India and so you won’t have to face any legal problems. Similar to how you can open and maintain deposits in more than one savings account in different banks, it is also possible to have multiple demat accounts with different brokers in India. A stock market trader or investor can own as many demat accounts as she/he requires. You can have one demat account with Upstox, another with Angel One, a third with Zerodha, and others with any brokers that the investor prefers.
As the global pandemic affected the Global economy in numerous ways, it has immensely impacted the stock/securities market and international stock indices across the world. The stock market indices, trading platforms and brokers have seen a rapid increase in the new accounts that are opened with them by brand new retail-investors & traders who began trading in the share market as a result of the pandemic-induced lockdown and to find a way to earn a separate income from salaried jobs.
Retail investors have grown in a considerable high sizeable amount, as fears of harmful viruses and global pandemic which has people losing their jobs and pose a high risk on their secure financial future, the people start to be acceptable of the fact that such pandemics are unavoidable as they spread and the best you can do is to take all precautions for both physical health and financial health wise whilst sitting at home, to balance out risk of losses. More and more people started to invest in the market as having their investments generating returns for future use can be beneficial to them in more than one way to gain a return on the invested capital.
The first and foremost requirement to access the securities market is a Demat account with a depository participant, which is usually your stockbroker. There are several of discount brokers available online that offer the new investors to open a Demat account and trade while charging them the minimum charges. However according to the preference of the investor there is also the option of a full-service broker which will not only offer you to open a Demat account and trade on the share market, but will also offer you various financial services for your investments with an additional cost. As we have learnt above, individuals are allowed to open multiple Demat accounts with multiple brokers, which allows them to have multiple Demat accounts under their name, they also have a limitation of being permitted only one single Demat account per Depository Participant.
However, investors who opt to open multiple Demat accounts also have to keep in mind the higher risks involved with maintaining multiple demat accounts. There are several reasons for one investor to do this, but this decision comes with its own drawbacks and increased risk of losses, if the multiple demat account holder is not well versed with operating multiple Demat accounts.
WHAT IS DEMAT ACCOUNT?
Demat account is short form for dematerialisation account. In finance dematerialisation means a process in which a client can get physical paper form securities converted into electronic securities/balances. A Demat Account can be a bit similar to a bank account to maintain and hold your share certificates and other securities that you have invested in a digitalised electronic format.
Back when there was no digital platform for stock trading, stocks and shares used to be bought and sold exchanged through physical receipts called certificates. The outcome and aftermath of this was shown in lengthy paperwork to be done by hand which wasted a lot of time and the processing of the documents took a considerable amount of time but errors were also more frequent. To solve this issue and to make the process more effective and efficiently done through the use of an electronic online trading platform which was becoming more common slowly in the Western parts and the Asian Markets, this process of dematerialisation of shares was first established in 1996. Physical paper share certificates were soon transferred and converted into electronic form of securities of the equal price and number and after the full digitalisation process were credited to the investor’s demat account. Hence making the trading practices a whole lot smoother, quicker and secure for the investors.
The process of investing in the share market has been made easier through the introduction of Demat Account. Demat Account makes investing in and Holding of investment securities such as bonds, shares, government securities, Mutual Funds, ETFs and insurance hassle free and easier, by converting the process entirely online and electronic. Eliminating the inconvenience of processing physical paper forms, documents, paper shares.
PROS OF OPENING MULTIPLE DEMAT ACCOUNTS-
1. One can open multiple demat accounts with different brokers in order to set apart the short-term and long-term investments. For example, in case of short-term investments an investor opens a Demat account with a broker that offers low transaction fees due to the total net trades being higher, the transaction fee will be charged on every transaction. Hence it will prove beneficial to opt for a broker with low transaction fees for short-term trade purposes. While on the other hand for long-term investments an investor can opt to open a Demat account with a broker that offers lower account maintenance charges for the long term investments, as due to the term being long investor is likely to hold on to his investments, and not transact them as much.
2. Opening multiple Demat accounts also helps in diversifying & widening investor’s portfolios, offering more credibility. In case the investor wants to invest in an IPO, & the allotment of the IPO is not available to the general investors, this is where a more diverse portfolio having multiple Demat accounts will more likely get you an investment opportunity and ease the selection for your portfolio for allotment. This advantage is also applied when dealing with some government securities.
3. Easy to manage- If an investor has multiple Demat accounts, it helps in classifying & sorting, plus efficiently managing different types of investments, it can be short- term investments or long-term stocks. A trader can opt to invest more often traded stocks with a discount broker while investing the long-term investments with a full-service broker.
4. Best of Both world- With multiple demat accounts, a trader can get the benefit of getting the best of both worlds, by incurring full benefits of full-service stockbroker and a discount broker. It gives traders access to various interfaces also with the added services provided by a full-service broker. Based on the trader’s requirements, they get the benefit from the various interfaces offered by different brokers.
5. Safety and security- Another pro of having multiple demat accounts is that the digitalisation of the securities in an electronic format provides a safe and secure interface of storing. It is much safer and puts an end to the hassles associated while dealing with physical paper documents & reduces the risk of fraud.
CONS OF OPENING MULTIPLE DEMAT ACCOUNTS IN INDIA-
1. You will be charged for the Multiple Annual Maintenance Charges (AMC) for different demat accounts
Opening multiple accounts will obviously increase the charges on the annual maintenance, there is an increase in charges relating to the multiple demat account that you have to pay. Even though you can open the demat account free of charge there is more possibility of an annual maintenance charge for the account to be paid. It has another downside that the transaction fees are also charged every time a trade is made. Hence, if you have multiple Demat accounts which you operate and trade through, then you need to pay higher transaction and maintenance fees, which can reduce the profits you make through your trading.
2. It can get difficult to keep track of and manage multiple demat accounts-
Another con, when considering the cons of a Demat account, is that each Demat account will require individual effort, time and attention. The downside of having multiple Demat accounts is that you will have to increase your time investment into managing the multiple demat accounts. It creates a complication when a trader has a full time 9-5pm day job or if the investor is looking to be a full time investor for when the market is active during the day till afternoon. A considerable amount of time needs to be dedicated to the stock market to make the trades profitable, in case of multiple demat accounts the amount of time which needs to be invested and given to the stock market doubles which can create inconvenience. The Operating of the multiple Demat accounts also requires bookkeeping skills from the investor due to the various information and reports on monthly, quarterly, and annual statements. Time required for trading can become an issue for most investors. Managing multiple demat accounts can consume a lot of time and it can also get exhausting. To make a profitable move, an informed decision regarding investments has to be made for which the trader has to be consistently active and be updated on the multiple news or various factors including chart indicator stock price fluctuations the right time for buying and selling the shares. To fulfil the responsibilities to manage the multiple demat account, one requires commitment given to the stock market trading.
3. Inactivity can lead to the account getting freezed-
When managing multiple demat accounts gets overbearing and investors neglect the account for a very long period of time and stay inactive for an elongated amount of time, their demat account can get freezed. And the stocks and securities which are stored in the account, the demat shares are safe with NSDL or CDSL and can be recovered. But to avoid your depository participant freezing your demat account and causing any inconvenience you should stay active on the account timely.
Conclusion- While it is possible to have multiple demat accounts under a single name with different brokers it is only a smart strategic move if the trader is an experienced investor so that he can manage the multiple demat accounts without many drawbacks. As calculated decisions and moves are required to be made at any crucial time in the volatile and dynamic market the trader/investor should have their ears perked up and mind at ready to make some profitable trades. Different depository participants have various pros and cons of demat account, which can be utilised to maximise returns. However if the owner of the multiple demat accounts is unable to operate and keep track of the demat accounts, it can lead to lower returns and increased charges. In a more generalized manner a trader should work towards reaping and optimising the benefits and gains from one single depository participant and one demat account for efficient investment returns and effective control. An investor should weigh the pros and cons of having multiple demat accounts and make the move according to the profitability of their investment plans and after assessing if having multiple demat accounts is the right move for them.