Are you considering investing in stocks but worried about managing lengthy paperwork or constant visits to brokers? Thanks to digital advancements, investing has become more easier than ever. With the help of Demat apps, investors can now open a Demat and trading account and manage investments conveniently from the comfort of their homes without visiting any brokerβs office. While you start your investment journey, you must know the difference between a Demat account and a trading account for smooth investing.
In this article, weβll explore the meaning of both the accounts and the key differences between them and know whether it is necessary to open both for investing.
What is a Demat Account?
A Demat or Dematerialized account is a digital account that holds all of your investments, including stocks, mutual funds, and bonds, securely and allows users to monitor and track them conveniently. Demat accounts have made the investment process much simpler and eliminated the need to maintain physical shares and other certificates. You just need to provide all the correct details and open your account via the Demat apps.
Key Features of a Demat Account:
- Stores all the financial securities and eliminates the need to manage lengthy paperwork.
- Protects your securities from loss, theft or damage.
- It is necessary to open a Demat account for making investments.
What is a Trading Account?
A trading account is an account that allows investors to buy and sell financial securities, including stocks and bonds. It acts as a bridge between a Demat account and your bank account. Whenever you buy financial security, it gets securely stored in the Demat account and money is deducted from the Bank account. You can open a trading account via stocks apps.
Key Features of a Trading Account:
- Allows you to buy and sell stocks conveniently online.
- Connect your Demat account to your bank account.
- By opening a trading account, investors can diversify their portfolios and invest in various securities.
Demat Account Vs Trading Account: Key Differences
Letβs explore the key differences between a Demat account and a trading account for your better understanding:
- Purpose: A trading account allows you to buy and sell stocks, while a Demat account stores all your securities in one place.
- Usage: A Demat account is necessary to hold long-term investments, and a trading account is for someone who does active trading.
- Linking: A trading account links your Demat account to your bank account and ensures seamless transfer of funds.
- Investment Type: A Demat account holds all the investing securities, including shares, bonds and mutual funds, via SIP selection apps. On the other hand, a trading account helps with actively buying and selling stocks.
Why Do You Need Both?
Every investor is required to open a Demat and a trading account, especially if you are into active trading. A Demat account digitally and securely stores all your financial securities, and with a trading account, you can seamlessly buy and sell shares and get access to the stock market. The shares you buy through a trading account need to be stored in a Demat account, and a Demat account alone cannot execute transactions in the open market. Hence, opening both trading and Demat accounts is equally necessary for every investor.
Final Thoughts
It is concluded that understanding the difference between a Demat account and a trading account is necessary. When looking for trusted stocks and the Demat app, check out Bajaj Finserv, which allows you to open both accounts conveniently and securely. Bajaj Finserv offers zero-cost Demat account opening, charges low brokerage fees, provides live market data, and enhances investors’ trading experience.
So, what are you waiting for? Itβs the right time to start your investment journey, open both accounts and earn high returns.
