Khota Paisa

Why You Don’t Need A Demat Account?

Posted in General by khotapaisa on February 16, 2010

When I first started investing, I opened a demat account with my bank. I started investing online thru mutual funds. I was doing exactly what others around me were doing. But soon I was using the demat account as my current account. I would buy fund (though on ad-hoc basis) and feel good about the fact that I had saved. But I would end up redeeming units whenever I needed money. The reason for withdrawal could be anything from birthday expenses to jewellary to even plane tickets. Over a period, I realised that I was withdrawing just because it was too easy (just few clicks) for me to do so. The ease of investment prvided by online demat account also resulted in many unneccesary emotional buys as I would buy on impulse. The demat account was actually becoming an impediment to saving towards long-term goals like retirement, child education etc. I finally decided to stop using my online demat account. I moved to the good old way of investment (paper based) thru my financial advisor. This meant that for any buy or sell, I had to call the advisor. He would then come to get the signature, cheque etc and process the request. This added extra hassle & time to any transaction I did. Though I never felt the extra hassle  or time involved, it drastically reduced no. of buys & sells in my portfolio. Another added advantage was the absense of online status of investment (though recently, the advisor has started providing this service). For a lot of investors, a big reason to sell or churn the portfolio is the ups & downs the investor observes on daily basis. So the less the investor looks at the portfolio, the better for the investor.
Recently, I sold the last holding in my online demat account. I am demat-free now!


4 Responses

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  1. Pradeep said, on March 4, 2010 at 9:50 am

    So true. My holdings in paper are still intact from last 3 years and demat based units are being churned often. But i still like the way i can control the investment without needing to call anybody.


  2. A said, on April 8, 2010 at 10:37 pm

    Demat is used for trading. (Read twice)
    So unless you are trader you will certainly liquidity the assets you bought.
    Old Fashioned mode will be risky when you know you are loosing money.

  3. Accord said, on April 10, 2010 at 3:48 pm

    Rightly said, long term investment is what works. You really have a unique bold clarity in your writings. Today SEBI agreed with your opinions & banned ulips the order is here:

  4. Srikanth Matrubai said, on April 16, 2010 at 6:00 pm

    Absolutely right sir.
    Mutual Funds are long term investment. By having your funds in Demat.,your cost of holding will go up as the Demat company will charge you annually even if you do NOT do any transaction in your account.

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