Top 5 Pros and Cons of Having Multiple Demat Accounts in India

According to reports from India’s leading depositories—NSDL and CDSL—over 10.4 million new investor accounts were added in 2020 alone, highlighting a growing interest in online trading and investments.

What Do You Need to Start Trading in the Stock Market?

To begin trading, the primary requirement is a Demat account. Most stockbrokers offer assistance in setting up this account, and many even offer fully digital onboarding. Choosing the right trading app or platform is equally important for seamless transactions.

Table of Contents

• What is a Demat Account?
• 5 Pros of Having Multiple Demat Accounts
• 5 Cons of Having Multiple Demat Accounts
• Conclusion

What is a Demat Account?

A Demat (Dematerialized) account is like a digital vault that holds your securities—such as shares, mutual funds, and bonds—in electronic form. It works much like a bank account, but for your investments.

For example, if you're trading shares on a delivery basis, a Demat account is essential. However, futures and options trading does not require one.

This article explores the key benefits and downsides of maintaining multiple Demat accounts.

5 Pros of Having Multiple Demat Accounts

1. Portfolio Segmentation

Multiple accounts help you segregate long-term and short-term investments, making your portfolio cleaner, more organized, and easier to analyze.

2. Access to Varied Broker Features

Each broker offers unique features, from research tools to different interfaces. Maintaining accounts with multiple brokers allows you to take advantage of the best offerings each one has.

3. Improved Digital Security

Since Demat accounts store assets electronically, risks like loss, theft, or damage of physical certificates are eliminated.

4. Better IPO and G-Sec Participation

Multiple accounts increase your flexibility in applying for IPOs or participating in government-issued securities, improving your chances of allocation (within regulatory norms).

5. Tax Planning Flexibility

Separating investments across accounts can help you better track capital gains and losses, making it easier to plan and file taxes efficiently.

5 Cons of Having Multiple Demat Accounts

1. Increased Cost Burden

Each account attracts Annual Maintenance Charges (AMC) and transaction fees. These recurring expenses can reduce overall portfolio returns over time.

2. Time-Intensive Monitoring

Switching between different platforms to track portfolio performance, holdings, and updates requires significant time and attention.

3. Complex Management

Each broker has its own login system, app interface, and reporting style. Managing multiple accounts can become overwhelming, especially for those new to trading.

4. Risk of Dormant Accounts

Inactive accounts may be frozen by the stock broker. While your securities are safe, recovering them requires paperwork and can take time.

5. Overlapping Investments

With multiple accounts, you might unintentionally buy the same stock in more than one account, making it difficult to monitor portfolio diversification and performance accurately. This can lead to redundancy or portfolio imbalance.

Conclusion

While having multiple Demat accounts offers more control, flexibility, and opportunities, it also comes with added responsibilities and costs. The decision to open more than one Demat account should be based on your investment goals, time availability, and willingness to manage the complexity.

Used wisely, multiple accounts can help experienced investors optimize returns and manage risk. However, for beginners, starting with a single well-managed account might be a better way to learn and grow.