The online trading system in India has made investing convenient. Investors need not go to floor-based stock exchanges and yell to buy or sell financial securities. Stock exchanges operate online now. They allow investors to connect with them through registered stockbrokers.
Individuals need to open a demat account, a trading account with the brokerage firms and bank accounts to start investing and trading in the stock market. These are the three accounts you need to open if you are looking to grab the investment opportunities in the stock market for significant returns.
Let us elaborate on these accounts one by one.
Meaning of demat account and its use
A demat account is an online repository for your stock market investments. It holds your stocks, bonds, government securities, mutual fund units, derivatives, and other assets in the dematerialised form.
Investors have two options to open a demat account. You can open a basic service demat account (BSDA) with a limit to the holding value of investments or a regular demat account without any limit on the investments’ holding value. A basic demat account allows you to hold securities of up to Rs.2 lakhs. If the value increases at any point in time, the broker can change the status of your basic demat account to a regular demat account.
- A demat account eliminates the risks associated with paper-based securities, like damage to certificates, bad delivery, delays, thefts, etc.
- It ensures the security of your investments.
- Online investing with a demat account is more cost-efficient than offline trading. There will be no account maintenance charges if it is a basic demat account. For a regular demat account, they may waive off account maintenance charges for the first year of account opening.
- It makes receiving corporate benefits, like dividends, interest or refunds, convenient with an auto-credit facility. Your demat account will automatically be credited with bonus issues, right issues, stock splits, etc.
Meaning of Trading Account and its use
A trading account is an online account required to access the stock exchanges to place trade orders for buying or selling financial securities. You can trade the listed securities on stock exchanges using your trading account.
An individual needs to decide the segment in which he/she wants to trade, like equity, derivative, or commodity market. Depending on your skills and desire, you can choose the segments to trade and open equity and derivative trading, commodity trading, or margin trading accounts.
- A trading account allows accessing multiple stock exchanges on one platform. Enjoy one-point access to primary exchanges, like BSE, NSE, NCDES, and MCX.
- The trading platform provided by the brokers is based on advanced technology that makes the trading procedure seamless.
- A trading account can use for high-frequency trading.
- Traders can access reliable information through research reports provided by the broker. It can be utilized to choose the right stocks to make investments.
Bank Account
Investors need a savings/current bank account and link it to the demat and trading account. Whenever you place a buy trade, your trade will be funded by your linked bank account to the trading account, and when you make a sell order, the account will be credited with sales proceeds.
This way, all three accounts make the trading process smooth and fast. If you are looking for cost-efficient investing or online trading, you can consider brokers in the discount broking space. Discount stockbrokers offer subscription-based trading plans and charge a flat rate brokerage irrespective of trade value. You can open a free trading account and demat account with discount brokers. Such features attract most investors and traders toward stock brokers. Stay invested and look at the growth of your investments.
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