What is a Demat Account?
A Demat Account allows traders and investors to hold the shares and securities in an Electronic format. Moreover, it replaces the old-fashioned trading and holding in physical shares with an innovative way of electronic form. A lot of paperwork is reduced due to it being in an electronic form and almost everything is done online. A Demat account will make investing and trading very convenient for any investor. Additionally, the shares are stored in dematerialized form and all the stocks once entered into the Demat account are converted from physical to electronic form.
What are the benefits of a Demat Account?
Less Paperwork: All your investments are stored in an electronic form that eliminates almost all documentation and reduces paperwork.
Reduces Cost: Trading in physical shares will reduce the higher transactional cost. Moreover, all the extra expenses like stamp duty and handling charges are eliminated by using a Demat Account.
Instant Transactions: As all the shares are in Electronic Form, a Demat account makes the transactions faster and results in quick credit for investors.
Safe and Secure: Trading in physical share format has many risks associated with like damage, loss, and misplacement of shares. Additionally, when you open a Demat account all these risks get eliminated.
Axis Direct Demat account opening guide
Some Facilities offered by Demat Account
Multiple Access
Easy Transfer of Shares
Freezing of Demat Account
Quick Dematerialisation and Rematrialization
How does an Online Demat Account Work?
An Online Demat Account is like a bank account only difference that exists is that a bank account holds cash and a Demat account holds securities and shares. Moreover, when you buy shares the DP or Depository Participant credits your Online Demat account with the particular shares you want to purchase. After the shares are credited, it is reflected in your statement of holdings. If you trade via the internet, you can view the holdings of yours in an Online Form.
When you go for a sell transaction for selling your shares you need to give instructions to your broker. Moreover, your account is debited with shares, and the money is received after the shares are sold. If you are trading via Online mode through the internet the debit transaction will directly be reflected in your account with credit of the amount of money.
Types of Demat Account
Regular Demat Account: A regular Demat account is appropriate and used by traders and investors who reside in India. SEBI has introduced an Account type that is called BSDA (Basic Services Demat Account) for investors with holdings that do not exceed Rs. 2 lakhs. The maintenance charges of this type of Demat Account are low annually.
Repatriable Demat Account: A Demat account type that is appropriate and used by NRIs or Non-resident Indians under which the funds can easily be transferred abroad. A Demat account of this type requires an NRE bank account in association with it.
Non-Repatriable Demat Account: A type of Demat account that is generally used by NRIs in which funds cannot be transferred abroad. In addition to that, a Demat account of this type will require an NRO bank in association with it.
What is a Trading Account?
Trading Account is usually used for buying or selling equity shares in the Stock Market. Moreover, the stock exchange previously was functioning on the open outcry system. In such type of system, the traders used verbal communication and hand signals to convey their decisions of buying or selling a particular stock by mentioning the quantity. Additionally, later the stock markets totally adopted the new and advanced electronic system.
Everything is now available in online mode where the buyers and sellers do not have to be present at the stock exchange in order to place a particular order. In addition to that, they even open a trading account for you with a registered stock market broker who conducts the trading. Every trading account has a unique ID for trading and that can be utilized to perform all the transactions online.
What are the benefits of a Trading Account?
Reliable Information: For going into the field of Equity Investing, you need to take the right decision at right time. Moreover, Online trading provides services like research reports and knowledgeable professionals. These reports provide the investors with reliable information that makes the investment decisions well-informed.
One-point Access: There are multiple exchanges in the country of India that help the investor to trade in a variety of commodities and securities. Some of the leading exchanges are NSE, BSE, MCX, and NCDEX. Moreover, having a trading account will enable Wealth creation in just one click.
Flexibility: The trading platforms provide flexibility as there is the facility of web-based and application-based platforms. You can have easy access to many devices from which you can trade.
How does a Trading Account Work?
A trading account acts as a mediator or link between the bank account and the Demat account of the investor. Moreover, investors can place his order through this type of account when he wants to buy shares. Additionally, when the buy order is placed the transaction is later processed in the stock exchange. The shares are credited into his Demat account and the proportionate amount of money is debited from the Bank account.
If a similar process takes place for the sale of shares. The investor should choose to sell a specific number of shares suppose 50 Shares. The transaction is processed in the stock exchange and the 50 shares (Example) are debited to his Demat account and the amount of money of those shares is credited to his bank account.
Conclusion
To sum it up, a Demat account will help keep your shares and securities in an electronic form, and a Trading account will help you trade in the stock exchange. Additionally, there are many benefits of a Demat like safety, instant transactions, less paperwork, and cost reduction. Moreover, the benefits of a trading account include one-point access, flexibility, seamless transaction, notification, and much more. Having Demat and trading accounts will make your trading journey simple and hassle-free.