Many of you have heard about the term “stock market” and don’t know about it. So in a few words, let us tell you about the stock market. The stock market is where both the individual and the investors meet together to buy and sell public shares.
If you are a person who wants to enter the stock market, you must now about two things, one is Demat account, and the other one is the Trading account. People who are in the stock market for a long time might be aware of how these accounts work. The beginners might feel that both Demat and Trading accounts are similar, but they are not, they are used for a different purpose and have differences.
I think you guessed where we are heading to. Yes, in this article, we will share the major differences between the Demat account and Trading account. This topic will be quite exciting, so just pay some attention.
Before knowing the Demat and Trading account differences, let us quickly know about them in brief.
What is a Demat Account?
The Dematerialized account is short-formed to the Demat account, and people started to call it as Demat since it was catchy. Jokes apart, Demat account is nothing but dematerializing all your documents like physical documents into an electronic format. In simple words, converting the physical format into electronic format and holding all of them is known as a Demat account.
A question may arise within you. Why should I dematerialize my physical documents? If so, here is the answer for you. The physical share documents that you hold or arranging in a folder might get damaged or even lost. If you have a Demat account, the documents can be shared easily when there is a need. So, it is recommended to have a Demat account.
What is a Trading Account?
A trading account is considered as a medium to buy and sell shares in a stock market. In other words, it is used as a medium to place buy or sell shares for a stock in an exchanging way. So once creating your Demat account, and in need to sell the shares or purchase recent securities, you will need a Trading account. Your trading account will have a unique trading number to trade in shares.
Trading in share markets requires three accounts: a bank account, a Demat account, and a Trading account. The trading account usually acts as a link between the bank account and the Demat account, which allows you to trade in the stock markets.
The advantage of having a Trading account is that it secures access to multiple stock markets like the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), Multi Commodity Exchange (MCX), and National Commodity and Derivatives Exchange (NCDEX). I think now you know something about the Demat account and Trading account. Now let’s try to understand the difference between them.
Major differences between a Demat account and a Trading account:
We all know about the savings account; it holds the money that we get them in hand and can be withdrawn whenever needed. Likewise, the Demat account allows the user/investors to store their physical and financial documents in a dematerialized form. This can be debited or credited whenever the need occurs.
Whereas, on the other hand, a trading account, works as a current bank account. A current account is an account that we carry for business purposes. In the stock market, you need both De-mat and Trading account to trade.
The functional differences between them are, a De-mat account holds are your securities in an electronic or dematerialized form. Whereas, a trading account, deals with buying and selling of the shares in the stock market.
Measurement of Time
As we know that a Demat account holds all the physical, financial shares, and other securities. At a specific point, all these are measured as stock, which is at the end of each financial year.
Coming to a trading account, it is just a flow statement that will reflect your trading transaction, which is measured over some time.
A Demat account is used to save your physical shares in an electronic form, and it ensures safety to the investors, which can be considered as the key role. The Demat account is used to represent your wealth in the form of shares. To purchase and sell these shares, you need a trading account. It is the major role of a trading account. It also allows you to carry out the trading transactions.
Now, in the end, you know what a De-mat account and a Trading account and their differences between them are. I hope this article helps you when you think about entering the stock market.
Source : bestdemattrading.in