In today's world, individuals are moving away from merely saving their money through bank accounts and earning interest on the same. Your regular Joe has now turned to the equity markets for better prospects. This is where the role of the Demat account becomes crucial. Although one does not need a Demat account to dabble in mutual funds, one definitely needs a Demat account to invest and make their fortune in the share markets.
Given the pertinence of the system, it is crucial to use the system adequately and mitigate errors. Therefore, here are the 5 common mistakes that one should avoid making while managing their Demat account.
Designation of A Nominee
When making a Demat account, much like when making bank account, one has to provide the regulators with the name and details of a nominee. In this case, unlike in the case of banks, one does not always have to immediately fill in the details for a nominee. This factor often ends up delaying the process of assigning a nominee, as people often procrastinate the process endlessly. Not adhering to the process could lead to impediments not only in trading in the present but also in the future when resources have to be withdrawn.
protecting one's demat login credentials, may they be passwords or usernames, is crucial to elude oneself from falling victim to unauthorised usage and subsequent fraud. | Representational Image
Management of Joint Demat Accounts
Although trading is usually (in many cases) carried out in an individual capacity by many, a lot like the banking system, interested parties, that is, a group of two or more individuals, can open and operate a joint demat account. It is essential to stipulate a system with duly assigned roles and responsibilities amongst the account holders to avoid any confusion or kerfuffle while transacting.
Recklessness Towards Security Norms
As with anything, many tend to be foolhardy towards the regulatory rules and regulations of the system, delinquently going about their trading activities where they could be entrapped by undesired elements. Therefore, protecting one's demat login credentials, may they be passwords or usernames, is crucial to elude oneself from falling victim to unauthorised usage and subsequent fraud.
One has to be diligent enough to periodically go through their investments and how they are functioning, thereby monitoring them. |
Overtrading Using a Demat Account
Now we move on to some more intricate aspects of the whole system. Overtrading, as the name suggests, is the practice of extensive buying and selling of equities at the market. This exercise often results in loss of resources in the form of transaction costs and increased tax liabilities. Therefore, one is expected to follow an organised and systematic protocol while investing.
Regular Monitoring of One's Investments
Finally, we come to an investor's overall approach towards the process of investment. One has to be diligent enough to periodically go through their investments and how they are functioning, thereby monitoring them. This is even more crucial for those who may have greater, more consequential amounts at stake. This said diligence would allow for a better understanding of the whole paradigm, and it would also induce maturity in the investor.
