If you are a new investor, you must have often wondered about the difference between a Demat account and a Trading account. There are instances where people have been confused by these terms and have even assumed that both are the same. However, both these accounts are two different entities and, to an extent, dependent on each other.
Both these accounts have a huge role in expanding the trading scene in India, as it is only after introducing these accounts that more people started trading. It is also to be noted that both these accounts are entirely digital. This blog will further discuss how both these accounts are different across various sections.
- The difference in Functions:
The Trading Account is the account through which you buy and sell equities, mutual funds, commodities, and other securities in the centralized share market.
A Demat account is an electronic account that holds the equities, mutual funds, commodities, and other securities purchased through the trading account till they are sold in the share market.
- The difference in the role:
The primary role of the trading account is to buy and sell shares, so we can say it is more or less limited to a transaction alone.
Demat account plays a very crucial role as it ensures the safety of the shares. The investor can hold their shares in digital format instead of physical form. This ensures that they don’t need to worry about the shares being lost.
- Difference In Nature:
A trading account is quite similar to a current bank account as it lets you carry out transactions in electronic form.
The nature of the Demat account is like that of a savings account. Just like the savings bank account is used to hold money, the Demat account is used to store shares, equities, government bonds, mutual funds, commodities, and other securities in electronic form.
- The difference in Time Measurement:
The Trading Account is a flow statement that reflects your trading transactions and is always measured over a specific period, such as the last one month, three months, or something similar to it.
The measurement of time concerning a Demat account is determined at a specific point in time which happens to be the 31st of March(the last day of the financial year).
Though both these accounts are interdependent, it is not mandatory to have one account open another. For example, if you plan to buy shares from an IPO and not plan to sell them in the share market, you don’t need a trading account, but just a Demat account to hold the allocated shares would suffice. Similarly, suppose you are going to trade only in futures, options, and currency derivatives. In that case, there is no need for a Demat account, but only a Trading account is enough as you are not going to hold any securities.
With that being said, both these accounts are essential for online trading in India. So, to trade in India, it is necessary to open both these accounts. Tradeplus provides an all-in-one trading account that comprises both Demat and Trading accounts. While other brokerage firms charge separately for both these accounts, we offer them both at absolutely zero cost. Also, it is to be noted that the account opening process is entirely paperless and will consume only a fraction of your time. Click here to open an all-in-one account today.