The looming financial uncertainty that continues to threaten Indians because of the 2019 Coronavirus pandemic has resulted in many individuals looking for alternative ways to raise their finances. Lately, many individuals have begun discussing the benefits that brew from a savings account and demat account concoction. In this article, we address the various questions you may have with regards to the linkage of a savings account and demat account.
What is a Demat Account?
A demat account is created for holding and trading stocks, mutual funds and so on in India. The name ‘demat’ is derived because of the ‘dematerialisation’ process this account follows. The process of dematerialisation refers to when physical share certificates are held by you in an electronic form. The opening of a demat account requires an agent. This agent is known as a depository participant (DP). This agent can be a bank, financial institution or any registered Securities Exchange Board of India (SEBI) agent. These agents pose as the middleman between you and your investments and are responsible for aiding you in setting up your account.
What is a Savings Account?
As the title suggests, a savings account refers to an account where extra funds are kept aside and stored for the purpose of accumulation. This accumulated amount earns interest over a period of time, thereby increasing the initial amount you have stored. This account can be opened by approaching any bank. Savings accounts are popular because of the security that comes with it.
Benefits of Connecting your Savings Account and Demat Account
These two accounts perfectly complement each other by aiding you in making more informed investment decisions. With both accounts linked, an individual is provided with the ‘inner scoop’ on everything investment related- which stock to invest in right now and when to pull out. With stocks, having the right timing (when to invest and when to pull out) is imperative and as such, ensuring that your knowledge on investments in the financial market gets updated on a timely basis is important. Thorough information on economic reports and summaries of investments are also accessible with this linkage. Seizing the right opportunity to invest in stocks with the right price is a lot easier with the demat account information you are provided upon this linkage.
Ease in Transfers
This linkage ensures that the transfer of funds to and from both accounts are easier. The money in a demat account is used for investment purposes. Being able to easily tap into the funds in your savings account to use for investment purposes eases investors into the investment process. This is great especially for first-time investors. If, for any reason, your monthly salary takes a hit, you can also easily transfer funds from your demat account to your savings account by merely accessing your demat account on the internet.
This linkage builds on the extant convenience you have as an owner of both these individual accounts. Connecting both the savings account and the demat account permits you to buy shares and remove or add funds to your demat account without any hassle. If you were to buy new shares, the pertinent fund value can be debited directly from your savings account and save you the time of having to do this manually.
The transfer of funds from one account to another eliminates any additional fund transfer fee upon successful linkage of the savings account and demat account. Another benefit that arises out of it is the elimination of upper limits when this fund transfer is made. With the information handed to you, you can get exclusive access to competitive investment prices that suit the type of investor you are (risk averse or risk loving).
Exclusive Investment Offers
With a demat account, most individuals just deal with trading stocks. By linking a savings account with a demat account, on the other hand, individuals can also buy and sell gold bonds, mutual funds and so on. This exclusive access to invest in other financial instruments convinces most individuals to link both their accounts.
The buying and selling of stocks can be quite turbulent. While on one day, the stock of a specific company may be rising, the other day it might dwindle and fall. For this reason, having access to various devices- smartphones, laptops, tablets and so on- where you can actively check on how your investments are doing and accordingly take appropriate action is important. Checking on your investments from anywhere in the world provides investors with a much needed level of flexibility.
The progress in technology has led to most work being conducted easily over the internet. For demat and savings accounts as well, the case is similar. The linkage of these accounts guarantees that by accessing one application, both accounts can be handled easily. This eliminates your need to download and keep up-o-date with several applications simultaneously. This facility also lets you monitor your investments easily regardless of where you are located.
In conclusion, linking a savings account and a demat account has many benefits, each of which relate to providing an individual with an additional level of convenience and comfort with the ease of navigating through their account. The constant updates on your investments act as a cushion for risk loving investors. You can also track the performance of your investments everyday which adds to your ability to actively predict how your investment will react to the introduction of new regulations with every passing day. The ease in the transfer of funds is one of the main reasons why individuals have begun linking their accounts. It reduces the time-consuming process of having to manually do it yourself during periods of emergencies. Finally, with the progress in technology and with most individuals trying to adjust to an electronic-driven lifestyle, accessing an application and ensuring that your investments are all performing as per your expectations has become a whole lot easier.