You may be offered an opportunity to open a free demat account if you have a savings account in a bank. Typically, this serves the purpose of storing any stocks and securities you may possess. Most demat accounts are linked to trading accounts normally. However, you can opt to have just a demat account without any link to a trading account.
When you open demat account, you can have it without it having a connection to a trading account. Most demat accounts can be opened online today. A demat account is essentially a storage facility for your shares, securities, and other assets in an electronic format. Generally, trading accounts and demat accounts are bundled with each other, and most investors think you cannot have one without having the other.
The common way that most investors hold accounts is to bundle a bank account, a demat account and a trading account together, just to facilitate the ease of purpose that these three accounts hold in a single place. For instance, an online broking account where you have a demat account and a bank account gives you the benefit of selling stocks held in the demat account. To sell these, you need a trading account. Then, profit from the sale can be transferred straight to your bank account. Also, if you buy stocks through the trading account, the funds to do so are directly debited from your bank account. The stocks bought are then stored in your demat account.
If you want to hold stocks, you do not necessarily have to open trading account. How is this advantageous to investors? You would think that bundling accounts enables you to gain three services with convenience and ease. However, whether you wish to bundle accounts or not depends on your purpose. Holding just a demat account without other accounts linked to it serves your purpose if you are just looking for a storage facility to house your assets that you may have earned earlier. Moreover, if you are an investor who invests only via public offerings or fresh fund offers, and don’t need to trade, just having a demat account suffices.
According to the kind of investor you are, and this depends on your choice of investment options, you may or may not bundle accounts all together. However, an online broking account or trading account begins to matter if and when you wish to sell your securities. You may also wish to start buying stocks. If you already have a demat account, you can always link a trading account with it when you choose to do so. Investors may also opt to have trading and demat accounts with two different firms offering these services.
Whether you wish to bundle accounts or not is entirely dependent on your purposes of investment, and what assets you invest in. You may also wish to weigh your costs with your benefits, and at Motilal Oswal, you can open a demat account for free and a trading account to grow your assets.
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