Demat Account vs Trading Account – The Exact Difference

First, check how to make a demat account.

Demat Account

A Demat account or a dematerialized account holds your stocks, bonds, mutual funds, and other securities in It is similar to a bank account that holds your money in digital format. When you buy shares of a company, they are transferred to your Demat account. When you sell them, they are debited from your Demat account and then you open a trading account online.

Features of a Demat Account:

Before you check the same, check the question – how to make demat account?

Safe and secure: A Demat account provides a safe and secure way to hold securities in electronic form, eliminating the risk of loss or damage associated with physical share certificates.

A digital record of holdings: A Demat account keeps a digital record of your holdings, enabling you to view your investments online.

Easy transactions: You can buy and sell securities using your Demat account, and transactions are settled in T+1 working days.

Corporate benefits: You receive corporate benefits such as dividends, bonuses, and rights issues directly in your Demat account.

Trading Account

Before you know how to open an account for online trading, you need to know about it. A trading account enables you to buy and sell securities on the stock market. It is similar to a bank account that allows you to spend your money. When you want to buy or sell securities, you need to place an order with your broker. The broker will execute the order on your behalf.

Features of a Trading Account:

Place orders: You can place buy and sell orders for securities using your trading account.

Online transactions: Trading accounts enable you to trade remotely, making it easier to buy and sell securities from anywhere. You can open an online trading account.

Leverage: Trading accounts offer leverage, which means you can trade with more money than you have in your account.

Real-time quotes: You can view real-time quotes for stocks and other securities in your trading account.

Differences between a Demat Account and Trading Account

Purpose: The purpose of a Demat account is to hold securities in electronic form. In contrast, the purpose of a trading account is to buy and sell securities in the stock market. Then, consider the idea to open trading account online.

Account opening: To open a Demat account, you need to approach a Depository Participant (DP) registered with the Securities and Exchange Board of India (SEBI). To open a trading account, you need to approach a SEBI-registered stockbroker.

Transactions: Demat accounts are used for holding securities while trading accounts are used for buying and selling securities. How do I open a Demat account?

Settlement: The settlement of transactions in Demat accounts is done in T+1 working days, while the settlement of transactions in trading accounts is done on the same day.

Corporate benefits: Demat accounts receive corporate benefits such as dividends, bonuses, and rights issues directly in their account, while trading accounts do not.

Fees: Demat accounts have annual maintenance charges, transaction charges, and dematerialization and rematerialization charges. Brokerage charges and transaction fees are associated with trading accounts, and open trading accounts online.