Difference Between Demat and Trading Account: Understanding Demat Account vs Trading Account

A demat account also known as dematerialised account, is an account that allows investors to hold their purchased shares and other securities in paperless form. For buying or selling securities, investors need another account, a trading account. Thus, a trading account is used for actual transactions. One can open Demat and trading accounts with a stockbroker. this article explains the difference between the demat and trading account.

Demat Account vs Trading Account : Key Differences

Point of Difference	Demat Account	Trading Account
Objective	To safeguard the securities of investors.	To provide access to buy and sell securities.
Function	Holding investors’ securities in digital form.	Helping investors to place buy and sell orders on the stock exchange by linking with bank accounts.
Nature	Similar to the savings account.	Similar to the current account.
Charges	Annual maintenance charge.	No annual maintenance charge.
Measurement Time	Measures securities at the end of the financial year.	Transactions are measured over a period of time.

Objective

The primary objective of a Demat account is to keep and safeguard the shares, bonds, mutual funds, exchange-traded funds, etc., bought by investors. In comparison, the trading account aims at allowing investors to trade these securities through the stock exchange.

Function

The Demat account acts as a repository and stores investors’ securities in electronic form. However, it does not allow buying or selling securities. For that, investors need a trading account. 

Investors can place buy or sell orders through their trading accounts. The trading accounts are linked with their bank accounts, from which they can add money to buy shares and transfer money received from selling shares. 

Charges

For Demat accounts, investors need to pay annual maintenance charges, and some brokers may also charge opening fees. However, there are no such charges for trading accounts. Investors need to pay brokerage charges while buying or selling shares.

Demat accounts and trading accounts are different and serve different purposes. Investors having both of them can enjoy a seamless transaction experience. However, it is possible to have a Demat account without a trading account and vice versa. Thus, you can choose to have either or both of them based on your purpose.

Frequently Asked Questions