But what is a Demat account? Is it the only account needed? What is a trading account then? Let’s discuss in detail about both of them.
What is a Demat Account?
Demat account is like a bank account but here instead of money transaction, the transaction of shares happens. When you buy shares, those shares are deposited in your Demat account and when you sell shares, the shares are withdrawn from your Demat account. So simply said Demat account is used to store the shares you have bought in the market.
What is a Trading Account?
But only the Demat account is not sufficient to operate in the stock market. Along with Demat, one will need a trading account as well.
A trading account is like a current account which is used to buy or sell shares in the stock market. It is a link between your Demat account and the stock market. When you buy shares, trading accounts credit the shares into your Demat account from the market and when you sell shares it debits the shares from your Demat account and sells in the market.
Simply put, Demat account is the storage of shares and trading account is for buying or selling shares in the market.
What are the charges to Open Demat and Trading Account?
The charges to open a demat and trading account depends on one stockbroker to another.
Now-a-days, discount brokers like Zerodha and Upstox are providing free account opening for their clients as a promotional strategy but we recommend Zerodha as our preferred choice in Demat and trading accounts. Zerodha is India’s biggest broker with zero brokerage charges for investing.
Zerodha also provides the best trading applications. Here is a direct link to Open Zerodha Demat Account Online
generally, the stockbrokers charge Rs 200 to Rs 500 for Demat account opening and around Rs 150 to Rs 500 for annual maintenance charges.
For the trading account, the account opening charges is around Rs 200 to Rs 800 and the annual maintenance charges are around Rs 350 to Rs 850.
You must make sure to check out in all the aspects of the broker rather than deciding on the basis of free accounts.
How to Open Demat and Trading Account?
To Open a Demat and Trading account in any stock broker you need to arrange a set of documents to upload. The documents required are
- Pan Card
- Aadhar card linked with mobile number
- Passport size photo
- Signature on a white paper
- Bank statements or cancelled cheque
Procedure to Open Demat and Trading Account
- To Open a Demat and Trading account under any stock broker you must compare the charges and services offered them thoroughly and choose the suitable stock broker according to your financial plans.
- You can contact the broker via mail or phone or Click on the account opening link to complete the process online.
- You need to fill an account opening form by uploading the documents required and also provide KYC details to complete the process online.
- Sign an agreement with the DP that provides the details of your rights and duties as an investor and DP.
- The DP will open your account and give you a demat and trading account number.
The trading account works as an intermediate for a savings account and Demat account. It takes shares available from your Demat account to sell them in the market and it takes money from your savings account and buys a share to keep in a Demat account. A Demat Account is a facility to keep your shares in an electronic dematerialized form.
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How does Demat Account Work?
Demat account is used to hold shares and securities in dematerialised/electronic format. Under dematerialisation, your share certificates are converted from physical form to electronic form so as to increase their accessibility.
Which is the Best Demat Account for beginner ?
As of now, Zerodha is the best Demat Account to open as it provides better services at lowest charges compared to any other stockbroker. You can Click here to Open Zerodha Demat Account for free.
Is Demat Account safe?
Yes, Demat Account is totally safe and secure as any asset can be.
How can I withdraw money from the Demat Account?
You cannot withdraw money from your Demat Account. It only stores your shares in an electronic form. If you have to withdraw the funds then it should be done from your trading account.
Do I need both a Demat and trading account?
Demat account is used to hold shares in electronic form(that you have purchased using a trading account) , and the trading account is used for trading in futures and options and buying and selling shares. If you only want to do intraday trading or futures and options trading , then a Demat account is not needed. This is because futures and options in India are cash-settled and do not occur in delivery.