The stock market is the aggregation of buyers and sellers that enables one to trade in stock/shares/ equity. It is one of the most appealing financial markets. It allows one to invest and trade in shares. However, in order to trade in the share market, it is essential to have a trading account. A Demat Trading account is an official account that one can use to trade in shares.
An investor must open a Demat trading account with a registered stockbroker to trade in the Share market. A stockbroker is an intermediary between the investor and the exchanges. The stockbroker platform enables one to buy or sell shares in exchange for a commission or fees.
The commission or fees on the Demat account depends upon various factors such as the quantity of trading, type of trading such as intraday, F&O and stock brokerage. It is essential to view and study terms and conditions in detail before opening a Demat Trading account.
What is a minor Demat account?
A minor Demat account is a Demat account opened and operated by the parent/guardian of a minor (below the age of 18). As per the Indian Contracts Act 1872, a minor can not be part of any financial agreement. A minor cannot execute financial transactions. Hence, a minor can not use a minor Demat account until he/she is above 18.
However, the parent or guardian can open a minor Demat trading account with any registered stockbroker and handle the trading transaction on the behalf of the minor. The Minor Demat account technically belongs to the minor but it is operated by the parent/guardian.
What are the benefits of a Minor Trading account?
Investments and financial decisions are tricky. Timing plays a very important role in determining returns on investing. Investing today at the right time can enable one to get huge returns in future. A minor trading account is an investment opportunity. It makes it possible to grab the thriving opportunities in the market and secure the future of loved ones.
Some of the benefits of a minor trading account include:
- Financial Planning: From school to medical expenses and higher education everything demands considerable attention. Investing in the right stocks today can prove to be beneficial in the long run. It helps one to prepare finances for the future and make a definite financial plan.
- Financial Literacy: As per many studies and reports only 24% of the total population in our country are financially literate, implying that very people are aware of the financial aspects and planning. Opening a Demat account in the name of your child makes it easy to impart knowledge to the kids about this subject. One can introduce kids to the concept of trading, the basics of savings, investments and much more.
- Equity Trading: One can only buy stocks/shares while using a minor Demat trading account. Equity trading is not permitted using a minor’s trading account.
How to open a minor trading account?
All you need to do is just submit some important documents to open a minor demat account such as the PAN Card of the minor, Aadhar Card, Address proof, identity proof of the parent/guardian etc.
One must make sure while registering the minor Demat account to complete the KYC registration of the minor. The KYC for the minor will collect some basic information about the parent/guardian such as PAN card details, Aadhar Card details, bank account details etc.
The parent/guardian of the minor trading account has the full charge of the account. The parent/guardian has the authority to buy, open, close and handles the minor Demat account.
The Bottom Line
A Minor Demat Trading Account can prove to be a great asset in the long run. It can be used to grow and track funds. It makes it easy to plan the education and vital expenses for the future. Opening a minor Demat account is one of the wisest decisions.