There are many ways of investing in shares of the company. One can purchase the shares directly from stock market. Otherwise one can invest in mutual funds. These mutual funds will further invest the money in shares on investor’s behalf
In whatever form we want to purchase shares, we need to open a DEMAT Account. Demat account is opened with a stock broker.
Demat account is like your bank account. In bank account, we hold money whereas in Demat account we hold shares. Demat account will show the opening balance of shares, shares purchased during the year, shares sold during the year and closing balance.
Therefore in Demat account, shares are held in demat form and not in physical form. The investor will be beneficial owner of these shares. Any bonus shares, right shares will come to Demat account. Physical share certificates will not be given for shares held in Demat account.
Investor will get statement of Demat account just like we get statement of saving bank account.
If anyone has shares certificate, they can open Demat account and can get physical shares certificates converted into demat form. This process is called Dematerialisation.
Policies of the Government are moving towards having all the financial assets in Demat form. Therefore it is better to open Demat account for investment in shares, mutual funds rather than having them in physical form