What is the difference between Demat account and trading account?

Short Answer

Trading Account is used for buying and selling securities while Demat Account is for holding various securities in electronic format.

Detailed Answer

As an investor, you may have often heard these two terms Demat account and trading account. Now many don't know the difference between the two and think they are the same. Here is this article, you are going to find out what is a Demat account and a trading account along with their differences. So without any further delay, let's get it started.

What is a Demat Account?

Demat account is a special type of account that is usually used for holding various securities such as shares, bonds, units of a mutual fund, and so on in electronic format. The main purpose behind having a Demat account is to hold various types of securities that have been bought (also known as dematerialized), which makes security trading easy for the investors during online trading.

What is a Trading Account?

A trading account on the other hand is a kind of investment account that allows the investors to trade in securities, cash, and various other holdings. Trading accounts are usually used for buying and selling stocks during a trading session.

Anyone can open a trading account by registering with a firm or a stockbroker. After completing the registration process, one unique ID is allocated to the investors which investors can then use to conduct all their trading transactions.

Many investors think that demat and trading account are the same thing. Although they sound similar to many, they are totally difference by how they work. Trading account is for performing trading actions whereas demat account is only for holding physical securities in electronic format.

Difference between Trading and Demat Account

As we can say from the above definitions, a Trading account is usually used for buying and selling securities, whereas a Demat account, on the other hand, allows investors to keep their securities in electronic format. Investors can also convert their securities from electronic to physical format if they have a Demat account.

Conclusion

So we hope that now you know the difference between the Demat account and the trading account. If you have any other questions regarding the Demat and trading account and ask the same in the comment section below.

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