The review on Dematerialisation by sujay marthi is very interesting and important. He has neatly juxtaposed conventional bonds, share certificates, etc., with its electronic equivalent, and explained what is what.
Till a few months ago I knew hardly anything about dematerialisation, and whatever shares(of no worth now!) I had I had passed on to a colleague to convert into Demat.
The initial payment was nominal. So also the annual payment. I get regular statements through e-mails and by post about what I passed on to my colleague. Now I do not have to bother about even the paper value of my shares. If the stock market picks up I gain. Till then I am not going to bother about my shares. In any case, I have not been deep into the so-called speculative market. My attitude now with whatever I have is tail I win, head I lose
PS Sujay suggested in his comment that I could say more about my experience. That is easier said(for Sujay!). Well, I do not have many shares and many shares of many companies. But, I have certainly encountered practical difficulties in having paper shares(both literally and metaphorically!) about which Sujay wrote at length.
I have never speculated in secondary market and my shares belong to the primary market.
On a few occasions when I wanted to sell part of my shares I had to approach a particular broker company. I gave it my shares and suggested that these can be sold at a particular price or above. After the sale I got messages on phone or by post about the transactions. Then I went to the broker company and collected my cheque.
But it was not always easy to collect the cheque! Brokers are brokers and they can bend or break you. Sometimes I had to go more than once to collect my cheque. The excuse was always outlandish and unacceptable, but once one has surrendered the shares the person is at the broker’s mercy. The brokers use our money for their own business and hence the dilatory tactics.
From what Sujay has written, and from whatever little I know about Demat, these problems do not exist in Demat transactions. But there are some questions which need answers. I shall raise only two.
One, can one pledge one’s Demat shares, as one could pledge the paper shares. In fact, a number of banks, particularly the multi-national types offer loans on security of shares.
Two, what happens if the Depository of one’s shares decamps or conks. If it can happen to a financial giant like the UTI it can happen to the financial pigmies also.
Incidentally, as I type this, it just occurred to me(a variant of serendipity!)why the original Policies issued by LIC, ULIP, etc., could not also be brought under Demat. I raise this because, I had a very unpleasant experience with the LIC, despite the fact that the Agent who takes care of my policies is an honest person.
I sent my Money Back Policy through him to get the cheque. The Policy is of foolscap length, and I am supposed to preserve it till dooms day(in my case for twenty years!). When I got my cheque by post along with the Policy, the Policy was in eight folds(it could not have been folded more, and it looked as though it was the work of someone who has paper as one of his strong dislikes, and probably his work of handling it as one of his stronger dislikes!) pushed into a straitjacket, an oblong envelope.
In the normal course, I would not have spared the LIC for its vandalism, but considering the humility and honesty of my agent, and the fact that he has to continue his work with the LIC, I left him with a stern warning.
Incidentally again, since Sujay has mentioned about Harry Potter, I suggest he should attempt an interesting, and even more hilarious(than Harry Potter!) review. My daughter, nine years, has already read all the books. Because of the small prints I could not. Since she is not a member of Mouthshut, she may not be the right choice for the review.