IPO investments present, arguably, one of the most exciting opportunities for investors keen enough to be part of a company’s growth from inception. An IPO is a way for companies to raise funds by offering their shares to the public for the first time. To investors, this translates to the possibility of owning shares in potentially high-growth ventures. But in this process of navigation in the IPO process, there exists a need to have at one’s disposal some of the tools that will be absolutely indispensable; one of these happens to be the Demat account. Without a Demat account, investment in an IPO is highly impossible since such an account does make buying and holding quite easy, not to mention a host of other benefits.
An investment in an IPO requires one to be in possession of a Demat account. A Demat account, the short form of a dematerialized account, is where the shares held are in electronic form, and it goes without saying that buying and selling and managing shares is way easier than in the days of physical share certificates. For deeper clarity on what role Demat accounts play in investments around IPOs, let’s understand demat account meaning and how such an account works in smoothing securities handling.
How a Demat Account Simplifies IPO Investments
1. Smooth application process
It reduces a lot of hassles in making the IPO application. Most of the IPO applications today are online, and the investor just needs to move with his Demat account number forward. That number then provides a unique identification number, through which your IPO allotments link directly to your account and ensure that shares, if allocated, get credited without any hassle. Most brokers and banks have an ASBA facility whereby at the time of bidding in an IPO, the required amount is blocked in your account but unblocks/debits it upon allotment.
2. Holding of Shares in a Safe and Securised Manner
Holding shares in physical form carried the risks of loss, damage, or theft in the past. Once your IPO shares are electronically held in a Demat account, it does not carry these risks. Once your IPO shares get credited into this account, you will be assured that they are safe. In this way, this electronic form ensures convenience in access and has made it possible to go through your holdings at any time.
3. Ease pertaining to tracking of investments and management.
A Demat account does make the tracking of investments in IPOs less complex. Once shares are credited to an account, one is able to track the performance of those shares directly from the account dashboard as far as their performance in the stock market goes. With this functionality, you should get updated with your investment portfolio and take decisions when the time is right either to hold on to their shares, sell them, or buy more. Further, holding all the investments under one roof sort of simplifies portfolio management.
4. Smooth Transfer and Selling Process
A Demat account makes it way easier to sell shares, not just buy them. After the stock has listed and the IPO performance is good, you would want to sell out your shares. Through the Demat account, such shares get transferred instantly for saving time and reducing paperwork, as compared to the physical transaction of the same. This efficiency is especially important when dealing with volatile stocks, for which decisions to buy and sell should also be fast-acting.
Benefits Beyond IPOs
Though necessary for any IPO investment, a Demat account is far from being useless. You can finally invest not just in stocks but also in mutual funds, bonds, ETFs, and government securities with a Demat account. In fact, a Demat account acts as one investing hub that holds all your investments in one place to make it easier for diversification and management of different asset classes under one account. Moreover, Demat accounts come under the vigil of regulatory bodies and hence are fairly transparent and secure to invest in.
Conclusion
A Demat account for IPO investment is more of a facility than a necessity for smoother, safer, and more organized investing. In fact, the entire process gets a facelift in every respect-from applying to an IPO to holding, managing, and selling shares. Opening a Demat account has been made quick and hassle-free with the advent of digital investment platforms. In fact, this allows investors to plunge easily into IPOs and avail themselves of newer opportunities. The knowledge as to what a dematerialized account is and its function in an IPO investment will help in your investment journey for wise and targeted decisions in order to leverage newer market opportunities.
