Having you initiated stock market trading, or decided to invest in some securities? Well, whatever you choose, either to trade or to invest, you need to get aware of the difference between brokerage account and Demat account.
Both of these accounts fulfill the basic requirements of the stock market, so before finally investing or trading, you should know the basics. For your clarity, we have framed out the key points of difference between brokerage account and Demat account. Just go through it!
What Purpose Does the Demat Account Serve?
A Demat account allows the investors to keep their investments in securities safely in an electronic form. The physical shares get converted into an electronic format in this account. With this account, you get a Demat account number that helps you settle your trades electronically. In simple words, it’s just like your bank account in which you keep the securities instead of money, and these can debit & credited as per your wish. You can even have zero balance in the Demat account, i.e., you can maintain it without any shares.
What Purpose Does the Brokerage Account Serve?
Trading or brokerage account is required for stock trading activities. This account needs to be registered with a stockbroker or a firm. The brokerage account permits you to trade in the stock market in the shares listed by various companies on an electronic system. A unique trading ID is granted to you after the creation of a brokerage account, which provides you the access to conducting trading transactions in the stock market.
Hopefully, you get the meaning cleared. Now Go Through the Difference Between in These Two Accounts!
Brokerage Account vs. Demat AccountThe difference in Nature of Both Accounts
A Demat account holds up or stores the securities that you buy from the market. It functions like a savings bank account where you need to store your securities.
However, a brokerage account works as a current bank account where you can sell your securities any time by withdrawing from the Demat account. Demat account and bank account; both are linked to the trading account.
Difference in Functionality
The functionality of both accounts is quite different. A Demat account allows you to keep the financial instruments or securities in an electronic form. However, the trading account allows you to sale & purchases the securities in the stock market. The securities get debited or credited from the trading account as a result of your action.
Difference in Measurement
Demat account is measured at the end of the financial year, i.e., March 31. This means the measurement of this account is possible at a point in time. However, the measurement of the trading account is possible over a period of time, like 6 months, 1 year, 3 months, etc. This is because it captures the transactions over a particular period so the measurement will take place accordingly.
Difference in Roles
Both the accounts play different roles, and for a trader, it’s imperative to have both the accounts. The reason is the significant roles played by these accounts. Let us clarify it!
As an investor, you use the trading account to buy and sell your shares. When you buy the shares, shares get reflected in the Demat account, and money will be debited directly from the bank. When you sell the shares by using a trading account, the shares will be debited from the Demat account and money will be credited to the bank.
So, without having a Demat account, trading is not possible. The role of a Demat account is to keep the securities and trading account gives you access to sale & purchase these securities.