BUSINESS

Why Do We Require A Demat Account? What Is A Trading Account?

Demat And Trading Account

To start your journey as a trader or investor, you can approach any exchange. and SEBI registered financial institution providing brokerage services for trading/investing in the Indian stock market. To trade successfully in the market, you need to understand what a demat account meaning is.

 

Why do we require a Demat account?

A Demat account holds great importance in the whole process of buying and selling securities. The Demat or the dematerialised account means ‘de-materialising’ the securities where shares, bonds, and certificates are held in digital or electronic form.

Earlier, when the technology was not advanced, the proof of purchase of securities was given in the paper. That would specify the holder’s name, company names, and the number of securities issued. Stock market traders would earlier keep these papers in bank lockers to preserve. If these certificates were torn, lost, or misplaced, the holder would lose the entire value of the holdings. as the hard copies kept with the holder were the only proof.

4 Important Points

  • The traditional system of holding shares and securities is now completely digitized. The shareholdings and securities are stored in a paperless account. just like bank accounts known as the Demat account. The account holder can keep these securities easily without any threat of physical damage and theft to his share property.
  • A Demat account justifies the safety of the securities and the transactions.  Securities maintained in a Demat account can be used as collateral for availing loans from banks or any financial institution. The value of the securities is calculated, and a reasonable value of the loan can be offered to the holder.
  • Demat accounts save time and cost for the holder compared to the traditional method of securities dealing. Expenses like stamp duty, transaction cost. and other handling charges become nil through an online Demat account. If the holder wants to liquefy the securities, Demat accounts facilitate the easy conversion of these securities into cash.
  • There used to be lengthy paperwork and formalities in the physical share trading process. This motivated the exchanges to understand the requirement of a digitized system for holding shares and securities in the form of Demat accounts.

When it comes to the accounts you need for stock trading, not only demat, trading meaning also holds value.

What is a trading account?

You can open a Trading account to facilitate easy, fast, and convenient investments. A Trading account serves as a link between a bank account and the Demat account. A trader performs all securities transactions through the trading account.

A Demat account is enough for you if you wish to simply hold shares and securities in the stock market. However, if you are looking to trade in the market, you would need a trading account also. A Trading account is your go-to account to buy and sell securities in the market. You will not be able to conduct trades in the stock market unless you have a Trading account.

If you approach a reputed stockbroker, they will ask you to fill an online account opening form and submit a few necessary documents online. With this, you can complete your Demat and Trading account opening process within minutes with the right broker.

Benefits of a Trading account

  • Acts as your platform to buy and sell shares and securities in the stock market.
  • It keeps a watch on your share market transactions and keeps a track of them.
  • Since it is an online account, it is convenient to access as all you need is a personal computer or mobile and a secure internet connection.
  • If you are looking to trade in Futures and Options you need a trading account for it.

With the right brokerage house, you can open a Demat and Trading account within minutes for minimum brokerage.

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