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Demat and Trading Account help you trade online in the stock market. Each of them plays a different role, but they are closely integrated to enable convenient online trading. If you are new to investing in stock markets, this article will help you understand how to take your first step towards becoming a stock market investor. Yes, the first step is to open a Demat and trading account. But before that let us explore what they are.
What is a Demat Account?
A Demat account is a repository where the shares you buy are stored in a digital format. The shares of companies are listed in the stock exchange where they are bought and sold. When you buy these shares, you have to store them somewhere, right? Well, these shares are stored digitally in a Demat account. If you go back to the pre-digital era, these shares existed as paper certificates. So if you bought a share, you had to go through plenty of paperwork. Thankfully, today all these shares are in electronic format so they can be stored safely and securely in a Demat account.
What is a trading account?
A trading account is a platform where you can place an order to buy or sell shares in the stock market. You can think of it akin to the interface of an online shopping website, where you see products and their prices, and you can place an order to buy. A trading account provides you the interface to view live share prices and place orders to buy or sell them.
If you placed a buy order, and it gets executed, the shares get transferred to your Demat account after T+2 days, where T is the day on which the order got executed. Similarly, you can sell a share in your Demat account by placing a sell order through the trading account.
Here, it is important to note the role of your bank account. In the process of opening a Demat and trading account, you will be required to provide details of your bank account. Your bank account will be linked to your trading account. You can transfer money from your bank account to the trading account and vice versa.
How to open a Demat and trading account in India
Now that you are clear about the role of Demat and trading account, let’s see how to open one. You can open an account n a few easy steps through a 100% online and paperless process. Here are the steps to follow:
- Find a stock broker and visit its account opening form on the website.
- Fill your personal details like name, phone number, email, etc. PAN Card is essential to create Demat account in India.
- Provide your bank details. Bank details are taken to link it with your trading account. You can add money from your bank account to the trading account to start investing.
- Choose a subscription plan- Brokers have multiple subscription plans and you have to choose one that suits your needs. Most brokers will also provide you with the option to open a free Demat and trading account. Just check the associated Demat AMC charges. This is the Annual Maintenance fee that the broker charges for maintaining your Demat account.
- Upload your KYC documents for proof of address and proof of identity. Besides, that documents will be needed for bank proof like canceled cheque, bank passbook copy, and bank statement. For trading in futures and options, proof of income documents will be required, such as 3-month salary slip, or Income Tax Return document.
- E-sign your document through OTP on your Aadhar linked mobile number. This step might differ across brokers. Some may require that you take a print out of the filled application, sign it, and courier it to the broker for processing.
That is all! Once your account is opened, you will receive the details to login to your Demat and trading account.
Disclaimer: Investments in the securities market are subject to market risk, read all the related documents carefully before investing.
