Investment basics

What Is an Investment?
• The money you earn is partly spent and the rest saved for meeting
future expenses. Instead of keeping the savings idle you may like to
use savings in order to get returns on it in the future. This is called
Investment. Investment is commitment of currents funds in the
anticipation of future benefits.
• An investment is an asset or item acquired to generate income or gain
appreciation. Appreciation is the increase in the value of an asset over
time. It requires the outlay of a resource today, like time, effort, and
money for a greater payoff in the future, generating a profit.
 Definition
• Investment is an asset acquired or invested in to build wealth and
save money from the hard earned income or appreciation.
Investment meaning is primarily to obtain an additional source of
income or gain profit from the investment over a specific period of
time
 Why should one invest?

• earn return on your idle resources

• generate a specified sum of money for a specific goal
in life
• make a provision for an uncertain future
• One of the important reasons why one needs to invest wisely is to
meet the cost of Inflation. Inflation is the rate at which the cost of
living increases. The cost of living is simply what it costs to buy the
goods and services you need to live. Inflation causes money to lose
value because it will not buy the same amount of a good or a service
in the future as it does now or did in the past. For example, if there
was a 6% inflation rate for the next 20 years, a Rs. 100 purchase today
would cost Rs. 321 in 20 years. This is why it is important to consider
inflation as a factor in any long-term investment strategy. Remember
to look at an investment’s ‘real’ rate of return, which is the return
after inflation.
• Real rate of return = Return on Investment – Inflation rate
• If the return on investment is 13% and inflation rate is 6%, then, the
real rate of return is 7%.
Future Value=Present Value×(1+Inflation Rate)Number of Years
Given:
Present Value (PV) = Rs. 100
Inflation Rate (r) = 6% or 0.06
Number of Years (n) = 20
Future Value=100×(1+0.06)20\text{Future Value} = 100 \times (1 +
0.06)^{20}Future Value=100×(1+0.06)20
Let's calculate it:
Future Value=100×(1.06)20\text{Future Value} = 100 \times
(1.06)^{20}Future Value=100×(1.06)20
First, calculate (1.06)20(1.06)^{20}(1.06)20:
(1.06)20≈3.207135472(1.06)^{20} \approx 3.207135472(1.06)20≈3.207135472
Now, multiply this result by Rs. 100:
100×3.207135472=320.71100 \times 3.207135472 = 320.71100×3.207135472=320.71
So, the cost of a Rs. 100 purchase today would be approximately Rs. 320.71 in 20 years
with a 6% annual inflation rate.
 When to start Investing?
• The sooner one starts investing the better. By investing early
you allow your investments more time to grow, whereby the
concept of compounding (as we shall see later) increases
your income, by accumulating the principal and the interest
or dividend earned on it, year after year. The three golden
rules for all investors are:
• Invest early
• Invest for long term and not short term
• Invest regularly
What care should one take while
investing?
• Before making any investment, there are certain steps to ensure
safety of investments. There are 12 Important steps to investing
where the investor must make sure to:
• 1. Obtain written documents explaining the investment
• 2. Read and understand such documents
• 3. Verify the legitimacy of the investment
• 4. Find out the costs and benefits associated with the investment
• 5. Assess the risk-return profile of the investment
• 6. Know the liquidity and safety aspects of the investment
• 7. Ascertain if it is appropriate for your specific goals
• 8. Compare these details with other investment opportunities available
• 9. Examine if it fits in with other investments you are considering or you have already made
• 10. Deal only through an authorised intermediary
• 11. Seek all clarifications about the intermediary and the investment and invest only if you
are comfortable. Refuse to invest if you are not convinced.
• 12. Explore the options available to you if something were to go wrong, and then, if
satisfied, make the investment.
 What are various Long-term financial options available for
investment?

• There are several options available for long term investments like Post
Office Savings Schemes, Public Provident Fund, Company Fixed
Deposits, Bonds and Debentures, Mutual Funds etc.
• Post Office Savings: Post Office Monthly Income Scheme is a low risk
saving instrument, which can be availed through any post office. It
provides an interest rate of 4%. Minimum amount for opening is Rs
500.
• Public Provident Fund: A long term savings instrument with a
maturity of 15 years and interest payable at 7.1% per annum
compounded annually. A PPF account can be opened through a
nationalized bank at any time during the year and is open all through
the year for depositing money. Tax benefits can be availed for the
amount invested and interest accrued is tax-free. A withdrawal is
permissible every year from the seventh financial year of the date of
opening of the account and the amount of withdrawal will be limited
to 50% of the balance at credit at the end of the 4th year immediately
preceding the year in which the amount is withdrawn or at the end of
the preceding year whichever is lower the amount of loan if any.
• Company Fixed Deposits: These are short-term (six months) to
medium-term (three to five years) borrowings by companies at a fixed
rate of interest which is payable monthly, quarterly, semi-annually or
annually. They can also be cumulative fixed deposits where the entire
principal along with the interest is paid at the end of the loan period.
The rate of interest varies between 7-12% per annum for company
FDs. The interest received is after deduction of taxes.
• Bonds and Debentures: It is a fixed income (debt) instrument issued for a period
of more than one year with the purpose of raising capital. The central or state
government, corporations and similar institutions sell bonds. A bond is generally
a promise to repay the principal along with a fixed rate of interest on a specified
date, called the Maturity Date. Debentures are instruments issued by companies
similar to bonds. These could be convertible, non-convertible or partly
convertible. Convertible debentures can be fully converted to equity at the
option of the debenture holder on maturity. Non-convertible debentures are
fully repaid on maturity and partly convertible debentures are partly repaid and
partly convertible on maturity, at the option of the debenture holder. Sovereign
Gold Bonds(SGBs) are government securities denominated in grams of gold.
They are substitutes for holding physical gold. Investors have to pay the issue
price in cash and the bonds will be redeemed in cash on maturity. The Bond is
issued by Reserve Bank on behalf of Government of India. Interest @ 2.5% pa is
payable. This interest is taxable in the hands of the investor. The capital gains on
maturity of the bond are tax-free. Minimum investment in these bonds is 1 gram
and maximum 4 kgs in a year.
• Mutual Funds: These are funds operated by an investment company
which raises money from the public and invests in a group of assets
(shares, debentures etc.), in accordance with a stated set of
objectives. It is a substitute for those who are unable to invest directly
in equities or debt because of resource, time or knowledge
constraints. Benefits include professional money management, buying
in small amounts and diversification.
• Mutual fund units are issued and redeemed by the Asset
management company (AMC) based on the fund’s net asset value
(NAV), which is determined at the end of each trading session. NAV is
calculated as the value of all the shares held by the fund, minus
expenses, divided by the number of units issued. Mutual Funds are
usually long term investment vehicles though there some categories
of mutual funds, such as money market mutual funds which are short
term instruments
• Life Insurance Policies: Though not strictly investment avenues, life
insurance policies also can be considered so based on the type of
policy. Life Insurance is a contract providing for payment of a sum of
money to the person assured or, following him to the person entitled
to receive the same, on the happening of a certain event. It is a good
method to protect your family financially, in case of death, by
providing funds for the loss of income.
• Types of policies include term life insurance, endowment policies,
annuities/ pension policies and Unit Linked Insurance Plans or ULIPs.
In term life policies, lump sum is paid to designated beneficiary in
case of the death of the insured. Endowment policies provide for
periodic payment of premiums and a lump sum amount either in the
event of death of the insured or on the date of expiry of the policy,
whichever occurs earlier. Annuities/pension policies give a guaranteed
income for life or for a certain period. In case of the death, or after
the fixed annuity period expires for annuity payments, the invested
annuity fund is refunded, usually with some additional amounts as
per the terms of the policy. A ULIP is a life insurance policy which
provides a combination of risk cover and investment.
• Typically a life insurance policy should be taken to mitigate the risk
and should be not considered as an investment product
Understanding the Investment
Risk Ladder
 Cash

• A cash bank deposit is the simplest, most easily understandable

investment asset—and the safest. It not only gives investors precise
knowledge of the interest that they’ll earn but also guarantees that
they’ll get their capital back.
• On the downside, the interest earned from cash socked away in a
savings account seldom beats inflation. Certificates of deposit (CDs)
are less liquid instruments, but they typically provide higher interest
rates than those in savings accounts. However, the money put into a
CD is locked up for a period of time (months to years), and there are
potentially early withdrawal penalties involved.
 Bonds
• A bond is a debt instrument representing a loan made by an investor
to a borrower. A typical bond will involve either a corporation or a
government agency, where the borrower will issue a fixed interest
rate to the lender in exchange for using their capital. Bonds are
commonplace in organizations that use them to finance operations,
purchases, or other projects.
• Bond rates are essentially determined by interest rates. Due to this,
they are heavily traded during periods of quantitative easing or when
the Federal Reserve—or other central banks—raise interest rates.
 Mutual Funds

• A mutual fund is a type of investment where more than one investor

pools their money together to purchase securities. Mutual funds are
not necessarily passive, as they are managed by portfolio managers
who allocate and distribute the pooled investment into stocks, bonds,
and other securities.
• Most mutual funds have a minimum investment of between $500
and $5,000, and many do not have any minimum at all. Even a
relatively small investment provides exposure to as many as 100
different stocks contained within a given fund's portfolio.
• Mutual funds are sometimes designed to mimic underlying indexes
such as the S&P 500 or the Dow Jones Industrial Average. There are
also many mutual funds that are actively managed, meaning that they
are updated by portfolio managers who carefully track and adjust
their allocations within the fund. However, these funds generally have
greater costs—such as yearly management fees and front-end charges
—that can cut into an investor’s returns.
• Mutual funds are valued at the end of the trading day, and all buy and
sell transactions are likewise executed after the market closes.
 Exchange-Traded Funds (ETFs)
• Exchange-traded funds (ETFs) have become quite popular since their
introduction back in the mid-1990s. ETFs are similar to mutual funds, but they
trade throughout the day, on a stock exchange. In this way, they mirror the
buy-and-sell behavior of stocks. This also means that their value can change
drastically during the course of a trading day. U.S. Securities and Exchange
Commission. “
Mutual Funds and Exchange-Traded Funds (ETFs) – a Guide for Investors.”
• ETFs can track an underlying index such as the S&P 500 or any other basket of
stocks with which the ETF issuer wants to underline a specific ETF. This can
include anything from emerging markets to commodities, individual business
sectors such as biotechnology or agriculture, and more. Due to the ease of
trading and broad coverage, ETFs are extremely popular with investors.
 Stocks
• Shares of stock let investors participate in a company’s success via
increases in the stock’s price and through dividends. Shareholders
have a claim on the company’s assets in the event of liquidation (that
is, the company going bankrupt) but do not own the assets.
• Holders of common stock enjoy voting rights at shareholders’
meetings. Holders of preferred stock don’t have voting rights but do
receive preference over common shareholders in terms of the
dividend payments.
 Alternative Investments
• Investors can acquire real estate by directly buying commercial or
residential properties. Alternatively, they can purchase shares in
real estate investment trusts (REITs). REITs act like mutual funds
wherein a group of investors pool their money together to purchase
properties. They trade like stocks on the same exchange.
 Real estate
• Investors can acquire real estate by directly buying commercial or
residential properties. Alternatively, they can purchase shares in
real estate investment trusts (REITs). REITs act like mutual funds
wherein a group of investors pool their money together to purchase
properties. They trade like stocks on the same exchange
 Hedge funds:
• Hedge funds may invest in a spectrum of assets designed to deliver
beyond market returns, called “alpha.” However, performance is not
guaranteed, and hedge funds can see incredible shifts in returns,
sometimes underperforming the market by a significant margin.
Typically only available to accredited investors, these vehicles often
require high initial investments of $1 million or more. They also tend
to impose net worth requirements. Hedge fund investments may tie
up an investor’s money for substantial time periods
 Private equity fund:
• Private equity funds are pooled investment vehicles similar to mutual
and hedge funds. A private equity firm, known as the "adviser," pools
money invested in the fund by multiple investors and then makes
investments on behalf of the fund. Private equity funds often take a
controlling interest in an operating company and engage in active
management of the company in an effort to bolster its value. Other
private equity fund strategies include targeting fast-growing
companies or startups. Like a hedge fund, private equity firms tend to
focus on long-term investment opportunities of 10 years or more
 Commodities:
• Commodities refer to tangible resources such as gold, silver, and
crude oil, as well as agricultural products. There are multiple ways of
accessing commodity investments. A commodity pool or "managed
futures fund" is a private investment vehicle combining contributions
from multiple investors to trade in the futures and commodities
markets. A benefit of commodity pools is that an individual investor's
risk is limited to her financial contribution to the fund. Some
specialized ETFs are also designed to focus on commodities.
 Gold
• Gold is considered as a safe haven asset and it performs well in times
of economic uncertainty, geopolitical tensions and during inflationary
environment. This was especially the case during the COVID19
pandemic, which saw gold rise to all-time highs during the Spring of
2020.
 What Is a Depository?

• The term depository can refer to a facility in which something is

deposited for storage or safeguarding, or an institution that accepts
currency deposits from customers, such as a bank or a savings
association. A depository also can be an organization, bank, or
institution that holds securities and assists in the trading of securities.
Deposits placed in a depository must be returned in the same
condition upon request.
• Depositories provide security and liquidity in the market. They use
money deposited for safekeeping to lend to others, they invest in
other securities, and they provide a funds transfer system.
 Understanding Depositories
• Depositories are buildings, offices, and warehouses that allow consumers and businesses
to deposit money, securities, and other valuable assets for safekeeping. Depositories
may include banks, safehouses, vaults, financial institutions, and other organizations.
• Depositories serve multiple purposes for the general public. First, they eliminate the
owner's risk of holding physical assets by providing a safe place to store them. For
instance, banks and other financial institutions give consumers a place to deposit their
money by offering time deposit and demand deposit accounts.
• A time deposit is an interest-bearing account with a specific date of maturity, such as a
certificate of deposit (CD). A demand deposit account holds funds until they need to be
withdrawn, such as with a checking or savings account.
• Deposits can also be securities, such as stocks or bonds. When these assets are
deposited, the institution holds the securities, either in electronic form, also known as
book-entry form, or in paper form, such as a physical stock certificate.
• Depository organizations also help create liquidity in the market.
Customers give their money to a financial institution; the company
holds it for a time and returns it when the customer wants it back.
These institutions accept customers' money and pay interest on their
deposits over time. While holding the customers' money, the
institutions lend it to others in the form of mortgage or business
loans, generating more interest on the money loaned than the
interest they paid to customers
 Example of a Depository
• Euroclear is a clearinghouse that acts as a central securities depository for its clients, many of
whom trade on European exchanges. Most of its clients are banks, broker-dealers, and other
institutions professionally engaged in managing new issues of securities, market-making,
trading, or holding a wide variety of securities.1

• Euroclear settles domestic and international securities transactions, covering bonds, equities,
derivatives, and investment funds. Domestic securities from more than 40 markets are
accepted in the system, covering a broad range of internationally traded fixed- and floating-rate
debt instruments, convertibles, warrants, and equities.21

• Euroclear. "Our Business."

• This includes domestic debt instruments, short- and medium-term instruments, equities and
equity-linked instruments, and international bonds from the major markets of Europe, Asia-
Pacific, Africa and the Americas.
 Where to Invest
• Stocks or Equities: A share of stock is a piece of ownership of a public
or private company. The investor may be entitled to dividend
distributions generated from the company's net profit. The stock's
value can also grow and sell for capital gains. The two primary types
of stocks to invest in are common and preferred.
• Bonds or Fixed-Income Securities: An investment that often demands
an upfront investment, and pays recurring interest over time, called a
coupon payment. At maturity, the investor receives the capital
invested into the bond. Like debt, bond investments are a mechanism
for governments and companies to raise money.
• Index Funds or Mutual Funds: Index and mutual funds aggregate
specific investments to craft one investment vehicle. An investor can
buy shares of a single mutual fund that owns shares of multiple
companies. Mutual funds are actively managed while index funds are
often passively managed. This means that the investment
professionals overseeing the mutual fund are trying to beat a specific
benchmark, while index funds attempt to imitate a benchmark.
• Real Estate: Real estate investments are investments in physical,
tangible spaces that can be utilized. Land can be built on, office
buildings can be occupied, warehouses can store inventory, and
residential properties can house families. Real estate investments may
encompass acquiring sites, developing sites for specific uses, or
purchasing ready-to-occupy operating sites.
• Commodities: Raw materials such as agriculture, energy, or metals
are commodities. Investors can invest in tangible commodities, like
owning a bar of gold, or choose alternative investment products that
represent digital ownership such as a gold ETF. Oil and gas are
considered commodities.
• Cryptocurrency: A blockchain-based currency used to transact or hold
digital value. Cryptocurrency companies can issue coins or tokens that
may increase in value. These tokens can be used to transact with.
Cryptocurrency can be staked on a blockchain where investors agree
to lock their tokens on a network to help validate transactions. These
investors are rewarded with additional tokens.
• Collectibles: Collecting or purchasing collectibles involves acquiring
rare items in anticipation of those items increasing in value and
demand. From sports memorabilia to comic books, these physical
items often require substantial physical preservation, considering that
older items usually carry higher value.
 How to Invest
• Research. Investors need to understand the vehicles they are putting
their money into. Whether it is a single share of a well-established
company or a risky alternative investment endeavor, investors should
do their homework.
• Establish a personal spending plan. Before investing, individuals
should ensure they have enough capital to pay monthly expenses and
have already built up an emergency fund.
• Understand liquidity restrictions. Some investments are less liquid than
others and may be more difficult to sell. An investment, like a Certificate
of Deposit (CD), may be locked for a certain period and cannot be easily
liquidated.
• Tax implications. Investors should understand the cost of short-term
and long-term capital gains tax rates.
• Determine Risk. Investing incurs risk. Investors may end up with less
money than what they started with. Investors uncomfortable with this
idea can (1) reduce their investment to only what they are comfortable
losing or (2) explore ways to mitigate risk through diversification.
 What Are Interest Rates?

• An interest rate is the percentage of principal a lender charges for

using its funds. The principal is the amount of cash granted.
• Borrowers pay interest as compensation for using a lender’s money.
Banks also pay interest rates as a reward for saving money.
• The interest rate charged on any loan or line of credit can vary
depending on the type, length, size, and purpose of the loan, as well
as other factors such as economic conditions, government policies,
creditworthiness, and the risks associated with it.
• To keep the economy functioning, central banks utilize tools such as
interest rates to regulate the supply of cash.
 How Does Interest Rate Work?
• People borrow money for various reasons, like buying a house, starting a
business, or leasing a car. Lenders charge interest on these as the cost of
borrowing.
• People also save their money in banks, which pay interest for allowing them to
use the depositor’s money.
• Interest rates are calculated by taking into account the principal loan amount
and any applicable fees or charges.
• The interest rate determines how much money you will have to pay back during
the life of your loan.
• Higher interest rates are charged when the risk of default is greater.
• For instance, if you have poor credit or are applying for a loan with no down
payment, the lender may view you as a higher risk and charge a higher interest
rate.
 Interest rates also vary depending
on the type of loan.
• For example, mortgages typically have lower interest rates than credit
cards since houses are considered reliable investments that will keep
their value over time, while credit cards are seen as liabilities.
• Similarly, you lend banks money in the form of your deposits.
• They pay interest rates as compensation for their use of your money
to fund loans, investments, and other activities. The Federal Reserve
determines deposit interest rates.
 Interest Rate Calculation
• Interest rates can be simple or compounded. Simple interest is a fixed
rate applied to the principal loan or deposit amount, while
compound interest applies an additional rate on any accumulated
interest from previous periods.
• Compound interest is also known as “interest on interest.”
• For example, if you borrow $3,000 at a 4% interest rate for 3 years,
the total amount of simple interest paid over the life of the loan using
the formula above is $360 ($3,000 x 0.04 x 3).
Simple Interest Rate
 Compound Interest Rate
• Compound interest is calculated by multiplying the principal amount
by one plus the annual interest rate raised to the number of years
interest is applied, minus the principal, to wit:
• For example, you borrow $3,000 with an interest of 4% compounded
annually for 3 years. Using the above formula, the total amount of
compound interest paid over the life of the loan is $374.59.
• Notice from the examples that compound interest is greater than
simple interest even with the same principal amount.

• The reason is that compound interest is charged on the principal plus

the accumulated interest from previous years of the loan.
 Factors that Affect Interest
Rates
• While interest rates affect investment returns or loan repayment
costs, it is also influenced by factors like the economy's strength,
inflation, supply and demand, government policy, credit risk, and loan
period.
 Economic Strength
• A strong economy with low unemployment increases demand for
goods and services, which can increase rates as businesses attempt to
borrow more money to meet this demand.
• On the other hand, a weak economy results in lower interest rates as
lenders are less confident about lending their money due to the
increased risk of default and decreased need for borrowing.
 Inflation
• When inflation rises, so too do interest rates. This is because lenders
require a higher rate of return on their investment to make sure they
do not lose out on purchasing power due to rising costs of goods and
services over time.
• In such a scenario, borrowers must pay back more than the principal
amount due to the currency's depreciation.
 Government Policy
• The government also plays an important role in determining interest
rates, as they use these to influence economic policy.
• For example, the Federal Reserve can raise or lower short-term
interest rates to manage inflation and stimulate the economy.
• These changes usually have a ripple effect that affects other interest
rates, such as mortgage and credit card rates.
 Supply and Demand
• Interest rates are ultimately determined by supply and demand.
When there is high demand for credit, lenders can increase their rates
as they have more opportunities to lend out money at higher returns.
• On the other hand, when there is a low demand for borrowing,
lenders will lower their rates to make their services attractive to
potential borrowers.
 Credit Risk
• Generally, the riskier a loan is deemed by a lender, the higher the
interest rate a borrower must pay.
• This makes sense as it incentivizes lenders to take on more risky
investments and compensates them for the higher chance of default.
• High-risk loans normally come with a base rate and a risk premium.
The latter considers the borrower's credit risk and accordingly affects
how much interest they will have to pay
 Time Period of the Loan
• The length of the loan can also significantly affect interest rates.
• Generally, the longer the loan period is, the higher the rate will be to
cover any additional risks incurred by lenders over time.
• For example, short-term loans come with many benefits, such that a
3 or 6-month installment loan usually comes with lower rates
compared to long-term ones such as mortgage or car finance loans.
 What is Dematerialization
• Dematerialization is the process of converting your physical shares
and securities into digital or electronic form. The basic agenda is to
smoothen the process of buying, selling, transferring and holding
shares and also about making it cost-effective and foolproof. All your
securities are stored in an electronic form instead of physical
certificates. Let us delve deeper into the topic of dematerialization.
• Two depositories called Central Depository Services India Limited
(CDSL), and National Securities Depository Limited (NSDL) is
registered with the Securities and Exchange Board Of India also
known as SEBI.
Why is Dematerialization Neede
d?
• It’s sometimes hard to keep track of all the paper-based documents.
Moreover, the increasing amount of papers day by day may lead to
missing an important document. It can become the cause of the break
down of the Indian Share Market and any businesses associated with
it. Not only that, if a share is being transferred 0.5% is saved for stamp
duty. If the original certificates are somehow misplaced it saves time
and money in obtaining duplicate certificates. Shares that are
dematerialized receive credits and bonuses right into their account
hence no chances of loss in transit followed by fewer interest charges
for loans associated with Demat accounts.
 Process of Dematerialization
• The Dematerialization starts with opening a Demat account. So, let’s
first see how to create an account.
• Select a depository participant (DP): Most financial institutions and
brokerage service firms are referred to as Depository Participants.
• Fill an account opening form: You need to fill an account opening
form to open a Demat account. This includes basic contact
information.
• Submit documents for verification: You need to submit a copy of your
income proof, identity proof, address
• proof, active bank account proof and one passport-sized photograph
for verification. All copies of documents need to be duly attested.
• Sign a standardized agreement with the DP: A standardized
agreement will contain the rules and regulations, charges you will
incur and the terms and conditions of the agreement between you
and the depository participant.
• Verification of documents: A staff member from the DP will verify all
the documents that you have submitted in your application.
• Demat account number and ID are generated: Once all your
documents have been verified, your Demat account number and ID
will be generated. You can use this information to access your online
Demat account.
 Benefits of Dematerialisation
• Easy and Convenient
• A Demat account provides you the facility to carry out
the transactions electronically. There is no need for
you to be physically present at the broker’s place to
settle a transaction. Moreover, the investor can have
access to the Demat account using a computer or
smartphone. In addition, you can convert your
physical holdings into electronic format to become the
legal owner of your shares.
• Fund Transfer
• By linking your Demat account with the bank account
you can easily transfer funds electronically. This saves
you from the hassles of drawing a cheque or
transferring the funds manually.
• Safe and Secure
• Demat account is the most secure and safest way to
carry out transactions by electronic means. All the
risks
• like theft, damage, loss of share certificates, etc. that
were associated with holding shares in physical form
are completely eliminated.
• Nomination Facility
• Demat account provides you the facility to grant the
right to operate your Demat account to the nominee
in your absence. With this facility, you can carry out
transactions in your Demat account with the help of a
nominee when you are not in a situation to do it
yourself.
• Paperless
• One of the main benefits of using a Demat account is
that it excludes the need for paper. Since the Demat
account is about holding shares or securities in
electronic form, the need for the paper is almost zero.
In addition, the Demat account has also proved to be
very useful for the companies in reducing their
administrative costs and hassles. Furthermore, cutting
down paper usage is also good for the environment.
• Avail Loan Facility
• The Demat account helps you in availing loans against the
holdings in dematerialized form. The securities and shares
held in Demat account can be kept as collateral and loan can
be taken against them.
• Easily Traceable
• With the help of a Demat account, you can monitor your
portfolio from your home, office or anywhere across the
globe. The flexibility to be able to monitor the portfolio
performance enhances the chances of you making more
profits because of the increase in participation and interest.
• Ease In Receiving Corporate Benefits
• Demat account eases the process of receiving various corporate
benefits like dividends, interest, refunds, etc. All the benefit amount
gets directly credited into the Demat account. Moreover, other
benefits like stock splits, bonus shares, rights shares, etc. get directly
updated into the Demat account.
• Multiple Purposes
• In the Demat account, you can not only hold shares or equities but
also debt instruments. You can even purchase, hold and sell mutual
fund units through the Demat account. In fact, you can even purchase
government bonds, exchange-traded funds, etc. in the Demat account