Is Demat Account Required For Investiing in SIP?

A demat account is mandatory to invest in stock market. But when you invest in the stock market via a Systematic Investment Plan (SIP), it will bypass the requirement of a demat account. However, there are many benefits to having one, therefore recommended.

Investors can directly invest in a fund through SIP by approaching a fund house. But using a demat account, you can compare different funds in one place and choose suitable ones for you without wandering here and there.

Here is the post explaining why you should consider a demat account to make investments, its functions, and the documents required for a demat account.

Demat Account

It is an online account which holds the financial securities in digital or electronic form. A stockbroker offers the these services on behalf of two central depositories in India, i.e., NSDL and CDSL. It is a mandate with a range of benefits for every entrant in the stock market.

Advantages for a Demat Account Holder

It is an easier and safer way of holding, tracking, and managing financial securities. It is apparent with the following advantages:

1.   A Central Place to hold a variety of financial securities

Demat account allows you to hold all your investments electronically in one place. You can hold and track all your investments like shares, bonds, exchange-traded funds, etc. in one place.

2.   Online storage with a higher safety of securities

Apart from tracking all your investments in one place, it ensures the safety of your securities from any loss, theft, damage, forgery, or any other malpractices. Each and every security traded in the stock market is under the surveillance of market regulating authorities like SEBI and central depositories.

3.   Automatic and rapid updates of your transactions

Demat account gets updated automatically every time you make any transaction to buy or sell a security. You can track your investments and thus performance in the investing journey.

4.   Different types of demat accounts for different residents

There are different types of accounts for Indian investors and investors from abroad. An Indian resident can open a regular account. And NRI investors can open a Repatriable or a Non-Repatriable Demat Account.

5.   Reduced cost of investing

The overall investing cost has decreased with the introduction of demat accounts. There was a heavy stamp duty to trade shares in physical form. It has reduced such expenses.

6.   Convenient online documentation

You can open an online account with lesser efforts and a convenient documentation process.

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Process to open:

Following are the easy steps to open a demat account:

Step 1: Based on thorough research, select a stockbroker. You can compare services and charges with different stockbrokers. Choose a SEBI registered stock broker to open your Demat account.

Step 2: Once you select a broker, fill in the demat account opening form along with the required documents. Documents required:

  • PAN card
    • Identity proof
    • Residence proof
    • Income Proof
    • Passport size photographs

Step 3: After submitting these documents, the broker will send you the details of the charges and the terms and conditions applied.

Step 4: Once you accept it, you need to go through in-person verification through a call. It is the verification process of your documents. This process may vary with different brokers.

Step 5: Once your documents are verified, your stockbroker will share your account number and password, and you can access your account online.

The entire process is digital so its easier and smoother. Thus, this is the range of added benefits that makes investing more convenient. Secure your financial securities, get quick updates of debit or credit of securities, enjoy the rapid processing of trades, and eliminate unnecessary paperwork.


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