Demat account vs trading account: what is the difference?
New investors often ask whether a demat account and a trading account are the same. They are two different accounts that work together.
Demat account
- "Demat" means dematerialised, or held in electronic form.
- It stores your shares the way a bank account stores your money.
- It is held with a depository. In India these are CDSL and NSDL.
Trading account
- It lets you place orders to buy and sell shares on the exchange.
- It is opened with a stockbroker.
Bank account
- It is linked to both. Money goes from your bank to the broker when you buy and comes back when you sell.
How they work together
When you buy a share, your trading account places the order. After the trade settles, the share is credited to your demat account. When you sell, the share leaves your demat account.
What to compare before you open one
- Account opening and yearly maintenance charges.
- Brokerage per trade.
- The app, customer support and reports.
- Whether the broker is registered with SEBI. You can check on SEBI's website.
Nominee
Add a nominee to your demat account. It helps your family claim the shares later.
This article is for information and is not investment advice.