Demat Account vs. Trading Account: What’s the difference?

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Understanding the Differences between Demat Account and Trading Account
1. Functional Difference: Demat account is used to hold securities in an electronic format whereas a trading account is used to buy/sell shares in the stock market.
2. Nature: A Demat account works just like a savings account. Like a savings account holds money, a Demat account allows investors to store financial instruments in a dematerialized or electronic form which are debited and credited accordingly. Whereas in a trading account it functions much like your current bank account. You are required to have both Demat as well as a trading account to trade in the stock market.
3. Key role: The key role of a Demat account is to ensure the safety you need in a trading account to purchase/sell shares.

Role of Trading Account and Demat Account
To trade in stock markets, you require a trading account and while trading a Demat Account holds your shares in an electronic format. Post opening, you must begin your trading journey with a thorough understanding of the market.When trading in stock market both the demat account and the trading play a crucial role. You require a trading account to process the transaction when you buy the stocks of any company. The bought shares are credited to your Demat account and the funds are debited from the trading account. In the similar way, when you sell your stocks, they are debited from your Demat account. In your trading account the funds credited will show.

Demat account is short form for dematerialisation account. In finance dematerialisation means a process in which a client can get physical paper form securities converted into electronic securities/balances. A Demat Account can be a bit similar to a bank account to maintain and hold your share certificates and other securities that you have invested in an digitised electronic format.

Back when there was no digital platform for stock trading, stocks and shares used to be bought and sold exchanged through physical receipts called certificates. The outcome and aftermath of this was shown in lengthy paperwork to be done by hand which wasted a lot of time and the processing of the documents took a considerable amount of time but errors were also more frequent. To solve this issue and to take make the process more effective and efficiently done through the use of an electronic online trading platform which was becoming more common slowly in the Western parts and the Asian Markets, this process of dematerialisation of shares was first established in 1996.Physical paper share certificates were soon transferred and converted into electronic form of securities of the equal price and number and after the full digitalisation process were credited to the investor’s demat account. Hence making the trading practices a whole lot smoother, quicker and secure for the investors.

The process of investing in the share market has been made easier through the introduction of Demat Account. Demat Account makes investing in and Holding of investment securities such as bonds, shares, government securities, Mutual Funds, ETFs and insurance hassle free and easier, by converting the process entirely online and electronic. Eliminating the inconvenience of processing physical paper forms, documents, paper shares.

If you want to invest your savings into securities like shares, ETFs or mutual funds you need to have a dematerialisation account or generally called demat account. A demat account is much more convenient, cost effective, quick and secure. To open a Demat Account you need to register yourself with any brokerage firm.

There are two ways to start your trading journey digitally:
The 2 ways of starting with your account are:
1. Online account opening method which is offered by almost all mainstream stock brokerage firms
2. The other way is the traditional method by submitting physical forms.

The first step which involves choosing which method you use to open your account is crucial but another important factor you should consider is choosing the right broker that fits your trading requirements and financial goals needs. As some brokers charge fees for various services also make sure you know of all the fees and any additional charges which are charged by the broker related to account opening procedure. Gain information on the user interface of the platform, brokerage fees/charges and its customer service.

In today’s world where wide digitalisation has spread and made the completion of every complicated task which had to be done physically or manually made convenient through digitally introduced online procedures. This also includes opening a demat account online and doing trading online, which gives us little to no reason to be filling physical forms because almost all your data can be stored digitally now.You can choose any brokerage which fulfils your requirement and offers online processing of information and online creation of demat account.

Now the clients can go on the website of the brokerage and sign up for a demat account opening and do the entire process of registration online.

You will most essentially need to link your Aadhaar card with your mobile number for this process.

1. Go to the website of Upstox.
2. You will find an online demat account opening page.
3. You will need to provide your minor details like name, phone number and email ID to sign up on Upstox. After you have filled in all the required details click on Sign up.
4. You are required to keep scanned soft copies of your personal documents like Aadhaar card, PAN card, a scanned copy of Cancelled Cheque, and your bank proof which requires the latest bank statement. Keep the above documents scanned and ready for when you are directed to upload them on the Upstox website for KYC verification.

5. The website will ask you to enter your Aadhaar card details and next you will receive an OTP on your mobile number which is linked to your Aadhaar card in order to verify your identity.

6. After uploading all the required documents and necessary details and completing the verification through the KYC process your demat account will be opened by Upstox in a few hours. It usually requires only a few hours but max up to 48 hours.

7. After the completion of the above steps you are all set to use your demat account for trading on Upstox!

Offline account opening process:
1. First step is to find a broker from Upstox and next the broker from Upstox or the Upstox employee at the physical office will provide you with an account opening form.
2. You are required to fill this form up and attach a proof of identity and a proof of address. This can be done by submitting the photocopies of required documents.
3. Proof of identity documents include Aadhaar card, PAN card, Passport, Driver’s License.
4. For Proof of Address you will need electricity bill, telephone bill which should be not older than last three months.
After the completion of the above steps you will need to sign an agreement with Upstox. This agreement document states your responsibilities as an investor, and of your brokerage firms. You should keep a copy of this agreement with you for future reference.

6. Following when your documents are verified and processed by the Upstox physical you will be provided with your account number, similar to how when you open your bank account at a bank branch and receive a bank account number.

7. Since you have opened a demat account through Upstox the account number you are provided with is called the Beneficial Owner Identification Number (or BOID) or Unique Client Code (UCC) if you’re trading with Upstox.

8. You are also to receive your confidential data such as your login ID and personal key data to access online portals and doing trades.

9. You should be aware of the fact that opening a demat account in the traditional offline manner requires additional charges for processing all of the documents and forms physically which can be costly and inconvenient. You might also incur charges for accessing and using the services of certain portals.

1. Account Opening Fees
2. Annual Maintenance Fee
3. Transaction Fees

Upstox charges minimal demat account opening fees of around Rs. 150 + tax. Annual Maintenance Fee of the equal amount is charged for the account.

Upstox has significantly lower charges than large broking firms and continues to keep costs low with the Transaction Fees as well – charging Rs 13+5.5+tax (Rs 5.5 being CDSL’s depository charges)

1. Up to ₹20/order* on Equity, F&O, Commodity and Currency
2. Zero commissions* on Mutual Funds and IPOs

Trading Account –
What Is a Trading Account?
A trading account is used to buy/sell shares in stock markets. Once you have a Demat Account, you need a Trading Account which has a unique trading number used to trade in shares. Once you start trading in share markets, you need three accounts:
Bank/Demat/Trading Account. Trading Account acts as a link between your bank account and Demat account, allowing you to trade in stock markets. Having an online trading account helps you to secure access to multiple stock markets.

Most generally, a trading account refers to the primary account of a day trader. Day traders investors tend to buy and sell assets frequently, often within the same trading session, and their accounts are subject to special regulation as a result.

How to open a trading account-
1. The first step is to fill the form. Opening of your trading a/c can be done by using your Aadhaar & PAN card and submitting all your details online.

2. Next upload all your documents on the website of Upstox andTake clear pictures of your documents. Upload when asked to.

3. You can start trading after youget your ID and once your details are verified. After the completion of the verification process you can login to your account to place orders.

Documents required to open a trading account-
You are required to provide your ID proof, Aadhaar card, PAN card

1. Address proof-
-Aadhaar card / Passport / Voter ID / Driving license

2. Bank proof-
-Bank statement / Cheque / Passbook

Benefits of a Trading account-
Get Single Accessibility to all the stock exchanges in the country:
If you are opting for trading account in India, investors can gain accessibility to every stock exchanges across the country through a single platform. The exchanges which you get access to include the Bombay Stock Exchange (BSE), the National Stock Exchange (NSE), Multi Commodity Exchange (MCX), and the National Commodity and Derivatives Exchange (NCDEX). 

Account holders have the facility through which they can access their online trading accounts from anywhere, at any given point in time. With website and application-based trading platforms like the app of Upstox which can be downloaded through play store, trading accounts can be accessed through any device PC, laptop, smartphones, tablets etc.

Access to Reliable Research:
When you have access to beneficial and reliable research reports prepared by the brokerage itself through the experienced and knowledgeable professionals they hire, makes the research report extremely beneficial and helpful for your trading practices. Such reports are often supplied by the service providers, which makes it easier to make more precise informed investment decisions. This helps in earning higher profits and return on investment

conclusion- In this blog post ,we described,all about demat account and trading account and the difference between both.if you want to hold the securities & shares go for demat account and if you want to do trading i.e. buy and sell of shares then go for trading account.

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