• HDFC securities
• 29 Dec 2022
• Open Demat Account

With rapid development in technology, the investing world has gone digital too. The advent of modern technology has not only made investing in the stock market easy and quicker but also widely accessible to the masses. The increasing cost of living has made investing and financial planning even more important to secure the financial future. In order to invest in the stock market, certain prerequisites exist, including a bank account, a demat account, and a trading account, among others.

 

Many novice investors and market participants often get confused about the differences between a demat and a trading account. Although both accounts are different from each other, they work hand-in-hand in order to make trading and investing convenient and hassle-free.

It is essential to know the purpose of these accounts to understand the difference between them.

• Demat account: An individual needs to open a demat account, also known as a dematerialized account, in order to invest in financial securities. The securities that an investor buys are stored in a digital format or a dematerialized form in the demat account. An investor can invest in various securities like stocks, mutual funds, bonds etc. These securities are all stored digitally in a demat which is linked to a depository.
• Trading account: A trading account, on the other hand, facilitates the buying and selling of securities. An individual can open trading account in order to buy and sell securities. Trading accounts are linked with a bank account through which funds can be transferred. A trading account allows one to trade in shares and financial instruments like future and options.

Some banks offer a 3-in-1 account. This account includes a bank account, demat account and trading account. This makes investing and trading seamless for investors and traders.

Demat account vs Trading account

Demat Account	Trading Account
A demat account is needed to invest and store securities electronically	A trading account helps in purchasing and selling securities available in the demat account
Securities like stocks, mutual funds, bonds, etc., can be stored in a demat account.	A trading account can’t store securities. It only facilitates buying and selling of securities.
A demat account is similar to a bank’s savings account, where securities can be safely stored.	The primary role of a trading account is to carry out transactions in the market.
A Demat Account will contain a unique number through which an individual’s demat account can be identified.	A trading account number helps in making transactions in the Stock market.

 

Demat and trading accounts are different, but both of them offer several benefits to an individual looking to invest in securities.

• Demat accounts store securities in a digital format, ensuring safety. There is no risk of misplacing, forging, or losing physical documents.
• The need for physical paperwork is eliminated by using Demat accounts.
• A trading account can help save time as orders can be placed, modified, and canceled within a matter of a few seconds.
• Demat and trading accounts make investing cost-efficient and easily accessible.
• The process to open a demat account and a trading account is quick and simple.