Introduction
Traders need to open Demat accounts to help them step foot into the world of stocks and shares. A demat account is a digital container of all the shares and investments that a trader has made and can easily be accessed through either the stockbroker’s website or mobile application. This eliminates the need for a physical paper trail. With a demat account, investors can’t start their stock market journey.
However, after the process of the new demat account opening has been completed, investors must steer clear of making mistakes that could endanger their account’s security.
Top 5 Mistakes to Avoid with a Demat Account
The stock market has seen an influx of new investors and traders who aren’t well-versed in how to keep their investments safe through a Demat account.
Yes, stockbrokers and even the stock market have certain safeguards, but investors must play their part too. Investors need to stay aware and vigilant at all times to avoid any mistakes that could lead to security breaches and potential financial losses.
Here are 5 of the most common mistakes that investors tend to make when they are using their Demat account.
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Losing Track of the Holdings
One of the biggest mistakes that investors can make is to not keep track of all their shares or investments that are in their demat account.
When the shares and stocks are not monitored, then the chances of investors losing out on opportunities rise. As a result, they end up suffering losses.
This is why investors or traders need to stay on top of how their investments are doing. This helps them make informed decisions and gain healthy returns from them.
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Overlooking Security Protocols
An investor’s login credentials to their Demat account are one of the most important aspects that investors need to safeguard. The brokerage will of course offer the trader every provision to protect these credentials.
However, it is up to the trader to play their part as well by choosing strong and unique passwords so that the chances of the account getting hacked are reduced.
They can also enable the additional security measures provided by the brokerage like two-factor authentication to make the login process air-tight.
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Overtrading
Though it might be tempting to trade often as it might seem like one will make more profits, that isn’t always the case. When you buy and sell stocks excessively, costs like transaction costs and tax liabilities go up.
Apart from this, constant trading also results in a dilution of the return on investments. This is why it is important to stick to a well-thought-out trading strategy unless frequent trading is absolutely necessary
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No Diversification in Investments:
When traders decide to concentrate on investing in a few, specific securities or shares, they increase the risk of losses.
This is why traders are advised to invest in assets that span across industries, classes and even geographies. This diversification in portfolios leads to mitigation of any potential risks and also increases the chances of potential returns.
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Falling for Rumours
The one thing that traders can’t afford to be in the share market is impulsive. Investing in certain stocks or shares solely based on a tip or a rumour can be a gateway to sustaining massive losses. This is precisely why traders need to do their research and make decisions based on their research and not a tip they got in the market.
Conclusion
It is of the utmost importance that traders do their research when they decide to open a demat account to start their trading journey. Though this list is concise, there are several other factors that traders need to consider when they are starting in the market to help them make profitable decisions.
