As someone who is serious about trading, you might be wondering if it makes sense to have two demat accounts. From a legal standpoint, this shouldn’t pose a problem. However, to find out if it’s a sound course of action for you personally as an investor, we will first need to cover basic ground and then work our way up to the answer.
A demat account is a type of account that holds all your shares in an electronic form. Its functions are similar to those of a bank account, except instead of money, your transactions involve financial instruments such as shares, bonds, mutual funds, etc. It makes keeping track of share documents more hassle-free, as dealing with physical paperwork can be risky and cumbersome.
Every demat account is held with one of the two depositories in India – the CSDL or the NSDL. Opening a demat account is fairly simple and straightforward. The most important documents required are your PAN card and identity proof.
Now that we know the vital details of opening multiple demat accounts, let’s discuss the benefits of doing so. Here are some of the most prominent advantages of using more than one demat account:
• Easier to separate shares according to short- and long-term financial goals.
• Helps you avail different features offered by different stockbrokers.
• Keeps track of investments and helps you avoid any confusion while bringing a sense of discipline to your trading.
Generally speaking, the downsides of having two demat accounts overshadow the benefits. Here are a few major ones you should be aware of before you make your decision:
• You will be required to pay Annual Maintenance Charges (AMC) for multiple accounts. The exact amount depends on the broker you choose.
• You will have to continuously keep track of both accounts, which becomes difficult if you are a frequent trader.
• On the other hand, if you remain inactive for long periods of time, the broker might freeze your account as well as the stocks it holds. These stocks can be recovered by contacting the CSDL or NSDL, though.
In conclusion, while it is legal and possible to open multiple demat accounts, you will first need to reflect carefully on the pros and cons before you do so. Your broker or financial advisor will be the best person to help you determine whether or not this is the most sensible move for you.