Pros and Cons of Opening Multiple Demat Accounts
The number of demat accounts in India rose to 10.4 crore in October 2022 from 7.4 crore in October 2021, a 41 per cent growth. In today’s world, where we have multiple social media and bank accounts, a question that can arise is, can one open multiple demat accounts? Along with this question, many other questions rise into our minds, such as “Is it legal to hold more than one demat account?”, “What are the pros and cons of holding more than one demat account?”
The answer to these questions is yes, you can open multiple demat accounts if you already have one. It is not illegal, but there are a few things to keep in mind before you do.
Things to keep in mind before opening multiple demat accounts
Nowadays, opening a demat account has become as simple as opening a savings bank account. But you need to consider the following.
- You can open only one demat account with each broker, and you need to approach a second broker if you wish to open another demat account.
- Multiple demat accounts can be beneficial for traders who want to segregate their investments and be more organised. They can use one demat account for trading and another one only for investing.
- Demat accounts you hold attract annual maintenance charges or AMC, which range from ₹500 to ₹1,000 per year.
- At present, there are two depositories in India, the National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL). Your securities are held with NSDL or CDSL. Thus, even if you buy your shares via brokers, they have no control over your holdings in the demat account, which makes your securities safe.
Pros of multiple demat accounts
- Organised Portfolio: Multiple demat accounts allow you to manage your investments with different brokers. For example, long-term investments can be made via one demat account, while intraday and F&O trades can be made through a second demat account.
- Access To Market Insights: With multiple demat accounts, you can easily access research and insights from different brokers. You can use these insights to boost your investments and enhance your current trading/investment strategy.
- Diversification Of Portfolio: You can diversify your portfolio with multiple demat accounts. You can segregate your securities into different demat accounts as per your investment strategies to reduce your risks and losses.
Cons of multiple demat accounts
- Higher Costs: Having more demat accounts means more account maintenance and transaction fees, resulting in higher overall costs.
- Requires More Time And Effort: Managing multiple demat accounts is not an easy task. You will have to spend more time and effort monitoring each account and its operations, which may not be possible for all investors.
- Cost Of Inactivity: With multiple accounts, you need to monitor the activity on the accounts and ensure that the accounts have routine transactions so that the broker does not freeze your account after a long period of inactivity.
Bottom line
Having multiple demat accounts can prove to be beneficial, though there are additional costs that you have to bear. Take advantage of your demat accounts to the fullest extent possible by considering the pros and cons above. If you are considering opening a new online demat account in minutes, you should visit the m.Stock website for a quick and easy onboarding process, along with zero brokerage and a quick KYC verification to get you started immediately.
