Difference Between Demat And Trading Account

By Author: finology ventures
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The financial world has gradually developed from the offline to online modes. People have changed their methods to trade and transact. Same is visible in the mentality of rapidness where buying or selling shares in the market is carried out within seconds now. Making money in the market is not a gamble though, it is a sheer process of systematic and scientific research and techniques which helps you invest wisely. To trade in the elementary stage, the basic knowledge about the accounts and their differences is a must. Demat or the trading account are some terms which you might have heard as a novice traders but what are the major factors which keeps them on different levels is the first step on your financial education journey. Let us know about these terms and the intricacies of their difference in this wealth creation planning of yours.

What is a Demat or a Trading Account?

Just as we have our bank account for our monetary transactions, we have our demat account for our share trading markets. While you need a single account to withdraw or deposit cash in banks, it’s not all the same when it comes to trading ...
... in shares and such is the difference between demat and trading account. Let us first break down the definitions to understand the concepts:
Demat Account: As an alternative to physical share certification, demat account is the dematerialised account which converts our physical shares in electronic form. It is used to hold the shares and securities of the public companies in the share market and we can hold a variety of investments like mutual funds, bonds, equity, shares government securities, mutual funds and exchange traded funds. It is like your piggy bank of shares where you keep all of your shares safely.

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Trading Account: Since we have talked about change and alternatives, trading account is the modern version of the outcry system prevalent in the stock markets where people used to convey their decisions using signal and verbal communications. It helps you to buy and sell equity shares in a stock market in the online mode. It comes with a unique ID which helps you to perform your required transactions. In contrast to the demat account where you hold shares, it is the link between demat account and the bank account of any investor.

What are the differences?
Since we are now clear with the definitions, there are a lot more difference between these two terms and we should know them in detail:

Demat Account
1. From the definition, it is clear that demat
account is used for holding of shares
2. The account holder is required to pay Annual
Maintenance Charges
3.It is suitable for the investors who prefer a long
term investment for holding
4.Approval of SEBI and NSDL is required here
5.A unique Demat Number is allotted to a
specific account
6.The main role of this account is to maintain the
safety of the investor’s shares
7.In scenario where you do not want to have a
trading account, the demat account is helpful to
have long hold where we do not wish to sell in
the near future

Trading Account
1.Trading account on the other hand is mainly for the transaction of securities
2.No as such payment is required to maintain this this account
3.Trading Account is helpful for investors who
perform transaction in a short period since it
works in the middle way rather than holding
4.No as such authentication is required
5.A unique Trading Number is required to carry
on the trades using this account
6.The purpose here is to just allow a medium of
exchange for investors to buy or sell
7.In cases where you just want a trading account, you will must have a demat account to store the shares and securities

Are both of them interlinked?
By now, you must have seen that there are a lot of differences in the working of both of these accounts but in a way, they seem to work together. Consider yourself as an investor, when you buy the shares of the company, it happens through your trading account where the money is debited from your bank account and the shares are reflected in your demat while when you sell your shares, they are debited from the demat account and credited back to your bank account. Both are crucial for trading in the stock market so one should be aware to open both the accounts.

Conclusion
Now we know that demat functions like a saving account where we store while the trading is the current account used to transact (not in the real sense). But one needs both to play their right strategies in the market. As a demat account holder, your shares will be measured at a specified point of time and on the other hand, trading is a flow statement that shows the trading transactions over a period of time. To open both of these accounts and to know their fees and charges and where you could open them, check out the services on our portal where you will get to learn everything about the procedure of opening your account now. Don’t wait, juts act.