Entering the stock market as a beginner is bound to surround you with a zillion questions. One of them is choosing between a Brokerage Account and a Demat Account.
While both accounts have their separate roles and importance to play in facilitating investments in the stock market, to make the right choice, it is important to understand the fundamentals. Tag along as we discuss the key functions and differences in facilitating investments.
What is a Demat Account?
A Demat account serves as an electronic depository of all your investments made over the years. The account is a portal that holds shares, stocks, bonds, funds and all other kinds of securities in an electronic form thus facilitating a complete paperless investment experience.
Demat accounts were introduced in 1996. As per recent reports, in March 2024 the number of Demat Accounts in India had reached a new high of 151 million. This goes out to establish the importance of the account and how investors have found it to be a reliable, convenient and quick portal for investments.
What is a Brokerage Account?
A brokerage account is a mandatory prerequisite in stock market trading as it provides a bridge between the investor and securities in the market. You open a brokerage account with a licensed brokerage firm like Bajaj Broking that allows you to deposit funds and invest in all types of securities in the market.
There are different types of brokerage accounts: a service brokerage account or a discount brokerage account. These accounts play a vital role in determining the success of an investor by providing facilities like quick transactions, competitive charges and personalised suggestions.
Brokerage Account vs Demat Account: Understanding the Differences
Let’s understand the differences between a Demat Account and a Brokerage Account to help you make an informed choice, by answering relevant questions:
1. Their Function
A Demat account is your online vault to store all the documents related to the investments you make. It facilitates a paperless experience and also showcases a simplified investment portfolio. On the other hand, a brokerage account is what you use to make transactions in the stock market.
2. Their Nature
Consider your Demat Account to be a savings account that instead of holding money, a demat account holds securities and other relevant documents of investments. A brokerage account is your current bank account that lets you make transactions.
Difference in Measurement
A Demat Account is measured at the end of each financial year i.e. 31st March whereas a Brokerage Account is measured over a period that can vary between 1 month, 6 months or a year.
How do I Open a Demat Account?
Here’s how you can open a Demat Account:
- Choose a depository participant of your choice. You can check the list of DPs that is available on the official websites of Central Depository Services Ltd and National Securities Depository Ltd.
- Fill in the form with personal details like Name, Age, Address, Income and so on.
- Submit the required documents.
- Wait for the DP to approve your account.
- Upon receiving approval you will be provided with credentials to access the account.
How do I Open a Brokerage Account?
Learn how to open a Brokerage Account with these simple steps:
- Zero down to the brokerage firm you wish to open an account with.
- Submit an application form featuring personal details and documents.
- Sit back and wait for the brokerage firm to approve your request before you can begin with investments.
Over to You
Now that you have gained some insight into both accounts, it is safe to say that to begin your journey as an investor you are going to need both accounts. A Demat Account will work as an online storage for documents reflecting your ownership over the securities you purchase through a Brokerage Account.
The advantage of choosing a credible brokerage firm like Bajaj Broking is that they provide you with updates on securities you are interested in to help you make smart choices.it can easily fit the bill if you are looking for the lowest brokerage charges demat account in india. Additionally, opening a Demat Account and Brokerage Account with the same portal further simplifies the experience.
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