Both the Demat account and Trading account are different concepts of investing in the stock market. Both participate in the market but in their own way.
A Demat Account helps an investor/trader store his securities in dematerialized form. Dematerialization is the process of converting physical certificates of securities into electronic form so that they can not only be easily accessed but also stored conveniently.
A Trading Account, on the other hand, helps an investor/trader in buying or selling his securities. These accounts are commonly used by day traders as their primary accounts. The frequent transaction of securities is done with the goal of achieving higher returns from the market. Clients hold both of these accounts under a Depository Participant (i.e., NSDL and CDSL).
But, how are they connected? What relation can a Demat account and Trading account have? Let’s learn about them.
The functionality of Demat Account and Trading Account
While buying shares from the stock market, individuals no longer need to be physically present. The selling of securities can be done through this trading account. The goal of this account is to buy shares at a lower price and sell them at a higher price.
Then how is the Demat account involved?
This account follows the process of dematerialization, by storing the bought certificates in electronic form. Intermediaries of clients get these electronic records automatically after they are bought. The Demat Account has a similar function like a savings bank account. While a savings account is used to store funds, the Demat Account is used to store securities.
Features of Demat Account and Trading Account
A Demat Account allows easy transfer of securities in a short time and makes the entire process of buying and selling much easier. Through this, clients will also be able to take loans concerning their securities stored and also receive dividends directly from the source.
The Trading account can only access the net buying and selling of securities and balance them accordingly. For this, the personal information of the client is a must. Also while trading, traders will be provided with a trading ID that can be used during online transactions. After the request of a relevant stock exchange is processed, shares are debited from the Demat account and the fund is credited to the bank account.
Benefits of Demat Account and Trading Account
The benefits of Demat Account include:
- Low risks: After the replacement of the physical certificates with the electronic ones, the Demat account has elevated the risk of misplacing the documents.
- Reduced costs: Under the Demat account, clients will not have to pay any extra stamp duty charges, registration charges or handling charges.
- Fast transaction: After buying the shares from the market, funds get transferred to your bank account at the end of the trading day
The benefits of a Trading Account include:
- Authentic Information: While trading, clients are provided with extensive research reports that are collected by experienced and knowledgeable professionals. The reports help to make investment decisions and maximize returns.
- Flexibility: The trading practices have become much easier after the introduction of app-based services, through devices like smartphones, laptops or other hand-held devices.
- One point access: There are several exchanges in India, like the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), National Commodity and Derivatives Exchange (NCDEX), and Multi Commodity Exchange (MCX). Through one trading platform, users can have access to all the exchanges.
How to open a Demat Account and Trading Account in SMIFS?
The procedure for opening of Demat Account and Trading Account at SMIFS is very easy.
- Go to https://www.smifs.com and click on ‘Open an Account.
- Type in the details in the required field using your name and registered mobile number.
- Once done, wait till the form is approved.
- Finally, e-sign into the account by verifying it with the OTP twice.
You can also go to the “steps to fill an e-KYC form” for a detailed understanding of the process.