Introduction:

Demat accounts are a necessary tool in helping you start your journey into the stock market. The Demat account opening process is a simple one and investors can choose to open more than one Demat account. 

Demat accounts help investors hold their shares or assets electronically. To buy and sell shares, however, investors need to have a trading account that will need to be linked to their demat account.  Though a single demat account can hold several securities, investors can choose to have more to help them streamline the security holding process. 

Pros and Cons of Opening Multiple Demat Accounts

Demat accounts are a great way to keep track of all your securities and opening multiple demat accounts can help streamline the monitoring process further. However, there are certain pros and cons of opening multiple demat accounts.

Pros of Opening Multiple Demat Accounts

• Better Portfolio Segregation:

With multiple demat accounts, investors can separate and categorize their portfolios better. For example, investors can divide their long-term investments and short-term investments into two different demat accounts. If an investor likes to invest across various categories, then they can categorize their multiple demat accounts accordingly. 

• Access to Multiple Perspectives:

When investors have multiple demat accounts, they also gain access to different perspectives on how to buy and sell stocks. If they have opted for multiple demat accounts with different stockbrokers, then the research by these stockbrokers will be a source of knowledge for the investor. With the different perspectives, investors can make better decisions leading to, possibly, more profitable investments.  

• Bigger Portfolio:

When you start trading in the stock market as an investor, you can keep adding a demat account as you go further in your investment journey to help separate all your shares better. The more an investor expands in this manner, the better their reputation in the market becomes. This reputation, particularly, can come in very handy if an investor is looking to invest in an IPO. 

• Safety:

With all the shares divided amongst different demat accounts, they stay safe and secure in electronic form, which can be accessed from anywhere, anytime. 

Cons of Opening Multiple Demat Accounts

• Charges:

Maintaining a demat account will incur charges. Even if the Demat account opening process is easy, and there are no initial charges for opening the account, charges like annual maintenance charges are always there. Each brokerage has its charges and if investors set up multiple demat accounts, the charges will only go up

• Time and Attention:

Every demat account opened by the investor requires individual attention. Investors need to remember each and every demat account number to operate them. So the more demat accounts, the more time and energy is spent monitoring each of them separately. It might not sound too difficult for seasoned investors, but less active investors will find this process hard. Investors who have the time, and have multiple demat accounts could find it easy, but for others, it is a time-consuming process. 

• Account Freezing:

For investors looking to open multiple demat accounts, it should be noted that if any demat account remains inactive for long, the broker is free to freeze it. The stocks won’t be lost and can be recovered, but the recovery process can be a hassle. 

Conclusion

It is crucial that investors, before thinking of opening multiple demat accounts, weigh all the pros and cons of the situation. For investors who have been in the market for long, managing multiple demat accounts might not be an issue. However, for investors who have only started on their investment journey, research is important before reaching a final decision regarding the opening of multiple demat accounts.