What exactly is the difference between a demat account and a trading account? What do they do?
In India, the securities market is one of the most popular investing options. The country’s securities market is strictly controlled and supervised. As a result, there are several criteria for getting started in the securities market, arguably none more important than opening a demat and trading account.
Although they are sometimes mistaken, a trading account and a demat account are not the same thing. A trading account allows you to buy and sell assets in the market, whereas a demat account is where such securities are maintained in a dematerialised or digital condition after delivery. For the convenience of investors, most Depository Participants (DPs) bundle demat and trading accounts. However, it is critical to comprehend the differences between the aforementioned accounts.
A trading account, as previously indicated, is required to place buy and sell orders in the securities market. When you buy equity shares in a firm for a delivery order, the shares are delivered to and stored in your demat account, which is linked to your trading account. A trading account is required for the trading aspect of the procedure, but a demat account is required for the secure storing of your assets.
Assets held in your demat account cannot be sold immediately. If you want to sell assets in your demat account, you must first transfer them to your trading account before submitting a sells order. Consider a trading account to be the aisles of a supermarket from which you can select any item and bring it to the checkout desk. A demat account, on the other hand, is analogous to your home’s storage cupboard or refrigerator, where you keep your purchased products.