You mandatorily require two accounts to invest in the stock market. One is the Demat account, and another is the trading account. Both accounts are necessary to make investments in stocks and other stock-related investments.
Joint Trading Account
Stockbrokers do not allow investors to open a joint trading account to avoid any confusion regarding taxation due to more than one account holder. Even a joint demat account has to be linked to a single holder trading account only. You can open a free online trading account with your demat account.
Joint Demat Account
Generally, a single-holder demat account is quite popular among investors. But if an investor is looking to open a demat account jointly, he/she can open it with a SEBI registered stockbroker.
A joint demat account allows more than one individual to access the same account. There can be a maximum of three account holders. But, only the primary holder will be entertained for all communication regarding the demat account.
However, the joint account facility is limited to a few brokers only. Most of investors prefer to open individual brokerage accounts. It does not create any havoc and keep transactions specific to an individual.
It is about the joint account. Let us discuss how an online trading account and demat works that differentiate the two.
What is the difference between demat and trading accounts?
Here are some basic differences between demat and trading accounts.
- A demat account is like a savings account for your financial securities as it is debited when you make a trade for sale and credited with a buy of securities. On the other hand, a trading account is a trading platform of financial securities that connects all buyers and sellers at multiple stock exchanges.
- A demat account is used to hold a variety of financial securities in the dematerialized form. It is used to dematerialize the physical shares in the digital format. On the other hand, a trading account is a link between your demat account and bank account.
- Every type of investor can use demat accounts. In contrast, a trading account is a primary account of intraday traders.
- If a trader wants to trade stocks, both the demat account and the trading account are required. And if he/she wants to trade futures & options, only a trading account can work.
- You can track your performance in stock trading using both accounts. A demat account figures out your total wealth in the stock market and tells you where you stand wealth-wise at a point in time, whereas with a trading account, you will find out what kind of transactions you have made until now.
Both accounts are different from each other but necessary to make the investing and trading process easier with a lot of services.
Important Points To Follow
Following are some important points one should consider while investing in the stock market.
Determine Investments Goals
An investor with clear and well-defined financial goals can plan their investment effectively. They can create a mix of best-supported financial assets to achieve their investment goals. This mix of financial investments will be helpful to meet their financial goals and protect them against the effects of volatility of the stock market.
Determine Risk Profile
Financial markets are full of investment avenues. The stock market also provides a variety of investment options with different levels of risk. Self-assessment is necessary to check your risk appetite. It will help you to pick the right kind of stocks.
Trust Your Extensive research
The stock market has huge potential to provide you with profits only if you can make informed decisions. To make an informed decision, you have to go through extensive research about the companies you want to invest in.
Keep your emotions at bay when you invest. If you find ups and downs on the route of long-term investments, do not get distracted with them and have patience.
This way, you can have a number of opportunities in the stock markets.