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Short for a Dematerialisation Account, a Demat Account is a digital account that holds shares and securities such as bonds, exchange-traded funds and mutual funds.

Both Demat and Trading Accounts are interlinked.

Both Demat and Trading Accounts are interlinked.

Planning to start your investment journey in the stock market? It’s important for you to understand the difference between a Trading account and a Demat account. People often get confused between the two. While the trading account and demat account are closely linked to each other, they serve quite different roles in the context of stock market transactions.

What is a Demat Account?

Short for Dematerialisation Account, it is a digital account that holds shares and securities such as bonds, exchange-traded funds and mutual funds. It acts similarly to a bank account, but instead of currency, it holds financial securities. This eliminates the need for physical certificates, providing security and convenience to the investor.

Is it Safe?

According to SBI Securities, Demat accounts are opened through a central depository, such as NSDL or CDSL, which are public financial organisations. In addition, SEBI’s close control and monitoring make this a highly regulated and structured business. Above all, demat allows you to avoid dangers such as share certificate loss, signature mismatch and faulty delivery.

What is a Trading Account?

A Trading Account, on the other hand, allows you to buy and sell shares on the stock exchange. It serves as a link between your bank account and your Demat account. You place buy/sell orders using your trading account and they are executed by stock exchanges such as NSE or BSE.

While a Demat account stores securities, a trading account facilitates transactions.

In simpler words, when you want to acquire shares, you use your trading account to make your order. Once the transaction is completed, the purchased shares are credited to your demat account. Similarly, when you sell shares, you submit an order through your trading account and the shares are deducted from your demat account.

Integration:

For stock market investments, both accounts are connected. Typically, you require both accounts to trade and hold shares –

– Purchasing Shares: Place an order through the trading account; shares are credited to your demat account.

– Selling Shares: Place an order through the trading account; shares are deducted from your demat account.

Understanding how a Demat and a Trading account work allows investors to manage their portfolios more effectively and avoid frequent operational misunderstandings.

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Business Desk

A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More

A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More

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