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Stock trading is one of the many sources that can offer an excellent source of income for our long-term future. The stock market is the most popular investment vehicle for the majority of people, especially in India. Apart from equity shares and mutual funds, investors also invest their money in stocks in order to cast a wider net. However, it is important to know that trading on the stock market is possible only after opening a registered trading account and demat account. In this article, we shall discuss about about the various types of trading accounts and demat accounts as well as their benefits and features.
demat account and trading account are two separate accounts
The trading account is a facility to place orders for buying and selling shares, while the demat account is a facility to hold those shares in an electronic format.
A trading account is like your bank account where you deposit money, buy and sell financial instruments (shares, mutual funds, bonds, etc.), and withdraw money, whereas a demat account is like a locker where you keep shares and other investments.
The trading and demat accounts are linked as you need both to invest or trade. You can’t buy stocks without opening a trading account and demat account.
A stock broker will help you open these accounts.
Most stock brokers offer free trading accounts if the brokerage fee is more than ₹20-30 per trade, but for a demat account there will be fees for maintaining it. There are no fees for zero balance demat accounts.
The trading account is used to execute buy or sell orders
Trading account is a must for investors who want to invest in the stock market. A trading account is a type of bank account that allows you to buy or sell financial instruments such as stocks, mutual funds, securities and derivatives.
A demat account is a type of account where investors can hold their shares and securities in an electronic format. Holding your investments in dematerialized form allows you to keep track of your investment portfolio in real time without the hassle of paper certificates. It also provides added benefits like faster share transfers, lower transaction costs and increased security.
The demat account is used to hold the stocks purchased
A trading account is one of the most important tools for an investor or a trader to buy and sell equity shares on the stock market. It is similar to a bank account in many ways, but it is used exclusively to buy and sell stocks, commodities and other securities in the stock market. A demat account is a separate account that is used to hold the stocks purchased by investors, who have opened demat accounts with depositories such as NSDL or CDSL.
It’s also important to note that opening a trading account alone does not allow you to purchase or sell shares on the stock market; you need both a trading account and a demat account.
Takeaway: It’s easy to set up a demat and a trading account and they’re key components of investing in the stock market.
A stock trading account is a basic account that can be opened through any of the brokerage firms. In this account, one invests in shares of companies and participates in their dividend payments. The terms and conditions for opening such a demat account are same as those for opening a normal bank account. A trading account is also known as a client account or a purchased order account.
Demat accounts are different from traditional investment accounts since these are not linked up to any bank accounts. To open a demat account, one has to fill the form available on the websites of the respective brokerages and provide necessary details like address, phone number, email ID and so on. Depending on the amount invested, the demat account comes with varying features like minimum balance requirements and transaction limits.
conslusion
The trading and demat account is a popular choice by most investors of all age groups, ranging from young to old. It is the primary tool used by investors to trade and invest in the stock markets. This article will help investors understand the importance of trading and demat accounts and their safety guidelines. You will also get to know where you can visit in order to open a trading or demat account.