Home/Blogs/Is It Necessary For An Investor To Have Both A Demat And A Trading Account

Is It Necessary For An Investor To Have Both A Demat And A Trading Account

stock market
30 Aug 20216 mins readBy MOFSL

If you’re new to stock trading, there’s a chance that you’re confused between a demat account and a trading account. A demat account is basically an account that’s used to store all of your securities such as stocks, bonds, and mutual fund units electronically. On the other hand, a trading account is an account through which you can buy and sell shares on the stock exchange (also known as the secondary market). 

To put it simply, a trading account merely facilitates the purchase and sale of shares on the stock exchange, whereas a demat account allows you to store the shares that you’ve purchased. So, is it really essential for an investor to have both demat and trading accounts? If this is something that you’ve long searched for an answer for, here’s something that can help clear things out. 

  • Is it necessary to have both demat and trading accounts? 

The answer to this question is simple. No, it is not necessary for an investor to hold both demat and trading accounts. As an investor, you can choose to just make do with a demat account alone. But, it is always advisable to possess both demat and trading accounts. Why, you ask? Here’s why. 

  • Why should you have both demat and trading accounts? 

While choosing to have just an online demat account is fine, you would be limited when it comes to investing. As a matter of fact, with just a demat account, you can only invest in Initial Public Offerings (IPOs) and mutual funds, which you can do through your bank account using a method called ASBA (Application Supported by Blocked Amount). However, you won’t be able to sell any of your investments on the stock exchange since you don’t have a trading account. 

As you’ve already seen above, a trading account is the account that facilitates purchase and sale of stocks in the secondary market (i.e. the stock exchange). And so, with just a demat account, you cannot buy or sell any shares contained within it through the stock exchange. This can leave you stranded and without a way to liquidate your investments as and when you see fit. This is precisely why it is advisable to open both demat and trading accounts at the same time.    

Conclusion

The key takeaway from this article is that although it is not necessary for an investor to have a demat and a trading account, it is always recommended to open both of them simultaneously. This way, you can ensure that the stock trading process happens in a hassle-free manner. Thinking about opening an online demat account? Reach out to Motilal Oswal right away. All it takes is just a few minutes to open a demat account online. 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C