Investing in equity shares in physical form involves a long procedure and a lot of paperwork and risk of getting fake shares. In order to keep the entire experience easy and streamlined, a Demat account is necessary. These accounts are used for trading online, and a demat account is used to hold shares and securities in a dematerialized/electronic format.
An investor will need a Demat account number for settling the trades electronically. Having a Demat account will allow an investor to buy shares and store them safely. They are similar to a bank account where an individual holds the deposits with bank and the record of debit/credit balances are maintained in a passbook, in the same way, when the investor buys or sells shares, they will be credited or debited from the investors Demat account. These accounts can be used to hold a variety of investments like equity shares, exchange traded funds, mutual funds, bonds and government securities.