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Every trader or investor in the Indian stock market needs a demat account. It works as an electronic wallet to hold shares and securities electronically and removes the need for physical certificates. While demat accounts come with multiple advantages, careful usage with proper safety measures is a must for both new and experienced investors. Join us as we discuss the top 5 mistakes to avoid when using a demat account.
1. Not Knowing the Associated Charges
Among the top errors investors commit is opening a demat account without knowing the fees involved. Lack of knowledge regarding demat account fees can lead to unforeseen payments that consume your profit on investment.
What You Should Know:
- Annual Maintenance Charges (AMC): This is an annual fee levied to maintain your demat account in operation.
- Transaction Charges: Charges may be levied for each transaction.
- Hidden Fees: Extra charges for SMS notifications, paper statements, or call-and-trade services can be charged.
What You Should Do:
Prior to opening a demat account, ask for a complete breakdown of charges. Compare providers on the grounds of cost and clarity. Opt for providers offering competitive or zero brokerage plans if you are keen on cost-effectiveness.
2. Overlooking Security Measures
Your demat account holds valuable investments and can therefore be a fraud target. Most users continue using weak passwords or do not activate simple security features.
What You Must Do:
- Generate a powerful password and update it from time to time.
- Activate two-factor authentication for extra security.
- Never give away your login credentials, OTPs, or access information to anyone.
- Do not share devices for logging in when they are public or shared.
3. Not Monitoring Your Holdings
Some investors purchase shares and leave them be. If left unmonitored from time to time, you may miss crucial market movements or actions. Conversely, being proactive in portfolio management allows you to make well-informed decisions at the correct time and maximise returns.
What You Should Do:
- Take a weekly look at your demat account.
- Go through account statements and check all debits and credits.
- Monitor news about the companies you have invested in.
- Watch out for dividend declarations, rights issues, and other shareholder benefits.
4. Selecting the Wrong Provider Without Research
Most investors open demat account after learning about it from some advertisements, word of mouth, or social media platforms and without examining the provider. It could result in high charges, poor customer support, or limited functionality. A well-informed decision might prevent regrets and unseen expenses in the future.
What You Should Do:
- Research and compare depository participants thoroughly.
- Compare user interface, customer ratings, platform performance, and support facilities.
- Check the fee structure of the demat account before you decide.
- Make sure the provider is SEBI-registered and has safe trading options.
5. Not Updating Contact Information
A surprisingly neglected error is not keeping your email, phone number, or address current in your demat account. This might lead to missing important alerts or notifications regarding your transactions, holdings, or security breaches.
What You Should Do:
- Get your contact details updated at once if there is any change.
- Verify your registered email and mobile alerts regularly.
- Act promptly in response to any suspicious communication or anomalies in account activity.
Bonus Tip: Don’t Trade on Tips or Hype
Acting on tips from friends or social media personalities without verifying facts is risky. Impulsive trades on unchecked information can lead to a loss of funds.
What You Should Do:
- Do your own research on reliable financial sites and company reports.
- Make decisions based on data, trends, and financial fundamentals, not rumours.
- Spend time learning about markets before you make investment choices.
Conclusion
A demat account simplifies the way of investing, but it must also be handled with care. Avoid these frequent mistakes, and your experience can be improved and your holdings will be secured. As you continue with your investment activity, stay informed and be proactive. Whether you want to open a demat account or already have one, these best practices will guide you towards making smarter, safer financial decisions in the long run.