A dematerialised (Demat) account is an account that allows you to hold your financial instruments electronically. If a savings account is used to hold your money, a demat account is used to hold your shares.
It is important to note that as an investor, you cannot trade in the stock market without a demat account. You can hold the certificates of all your financial instruments in a Demat account such as Mutual Funds, Exchange Traded Funds (ETFs), Shares and Bonds online.
A Trading account is used for buying and selling stocks in the stock market. Trading account not only holds stocks, but also the cash, securities and other types of investments. To execute certain transactions through trading account, a Demat account is largely necessary.
A Savings account is a deposit account where you save your money and receive a nominal interest on it from the bank, ensuring the safety of the money deposited. It facilitates savings and it is easier to access the funds in your bank account.
The above three accounts are linked together in a certain way. Let us understand how,
In the Savings account, the money is deposited to transfer funds for buying shares and on selling the shares, it is used for receiving the funds. The funds are transferred to the Trading account for the purchase and sell of the securities. These securities further gets digitally deposited in the Demat account. All these accounts are linked together and are interdependently of each other.
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