What is a Demat Account and why is it named like that?
- Paras
- Sep 4, 2023
- 1 min read
Key Point:
A Demat Account is an account that you use to hold money-making things like stocks, bonds, equity shares, government securities, mutual funds, exchange-traded funds and so on.
It's a short-form of Dematerialisation Account - DEMATerialisation ACCOUNT.
Think about your bank account. You store money in it - both physical and digital - and transfer it when you feel like it. It allows easy access to our funds while offering security from theft and mishandling. In a similar way, a Demat account holds electronic assets like stocks, bonds, mutual funds and so on. An important difference between bank and Demat accounts is that a Demat account holds ONLY electronic assets, and NOT physical assets.
In the old days, shares were held in the form of physical certificates, which were cumbersome to store and transfer. The advent of a Demat Account converted them from physical to electronic - it DEmaterialised them!
And that's how we get the term Dematerialised Account, or simply Demat Account!
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