Investing in the stock market presents a lucrative opportunity for investors looking to accumulate wealth. Opening a Demat account and trading account is the first step towards stock trading. If you are an aspiring investor, you need to understand Demat vs trading vs savings accounts in detail. These three accounts are essential for stock market transactions. You should also know about the 3-in-1 account that seamlessly integrates all three accounts, simplifying transactions and providing a hassle-free investing experience.
Types of Accounts
Let’s understand in detail the three types of accounts: savings, Demat, and trading accounts.
Savings Account
A savings account is a deposit account offered by banks that allows individuals to securely store and manage their funds for short-term needs. It is an essential part of personal finance, providing liquidity, easy access, and low risk.
Key Features:
- Earns Interest– Depending upon the type, a savings account offers competitive interest rates on the deposited amount.
- Liquidity – Funds can be accessed through ATM and online banking.
- Funds Transfer and Payments – Facilitates easy transfer of funds, UPI facilities, and bill payments.
- Additional Benefits– Standing instructions for automatic fund transfer, preferential loan rates, and exclusive discounts.
Demat Account
A Dematerialised account, or Demat account, is used to store securities like stocks, bonds, mutual funds, and ETFs in electronic or Dematerialised format. Investors do not need to hold shares in physical certificates. A Demat account functions like a bank account, as it allows both deposits and withdrawals. Your account is credited or debited based on the number of shares you bought or sold.
Key Features:
- Dematerialised Format– Easy storage of stocks and securities in an electronic format.
- Safety – Safe electronic storage eliminates risks of theft, forgery, and loss of physical share certificates.
- Mandatory Requirement – SEBI has made it mandatory for investors to hold a Demat account for stock trading.
- Ease of Trading – Buying and selling of shares can be settled efficiently.
Trading Account
A trading account is an online platform for buying and selling shares. It facilitates transactions, while the Demat account holds the purchased shares. Acting as an intermediary between a Demat and a savings account, it ensures seamless fund transfers for stock trading.
Key Features:
- Trade Execution– Processes buying and selling of stocks and derivatives.
- Market Information– Provides real-time market data including stock price and charts.
- Margin Trading– Some trading accounts allow investors to borrow funds for margin trading.
- Account Management– Trading accounts allow access to statements, trade history, and various other relevant information.
Demat vs. Trading vs. Savings Account
A common misunderstanding among new investors is that Demat and trading accounts are the same. However, they serve different purposes. The table below reflects the differences between Demat, trading, and savings accounts.
| Features | Demat Account | Trading Account | Savings Account |
| Purpose | Stores purchased securities electronically | Facilitates buying and selling of stocks | Securely stores funds- and earns interest |
| Function | Acts as a platform to view a portfolio of shares | A platform for executing trades | Provides liquidity and fund transfers |
| Regulatory Requirements | Mandatory for holding stocks and securities | Mandatory for executing stock market transactions | Mandatory for financial transactions and managing funds |
A 3-in-1 Account: Why You Need an Integrated Solution?
A 3-in-1 account seamlessly integrates a Demat account, trading account, and savings account under one platform. It enables hassle-free stock trading in the following ways:
1. Ease of Fund Transfers
An integrated system allows instant fund transfers from your savings account to your trading account for buying stock. Similarly, the proceeds from the sale of shares are credited back to your savings account without any hassle.
2. Ease of Investment
You can invest in stocks, bonds, mutual funds, and IPOs easily with all three accounts linked. The trading account executes the transaction, the Demat account holds the securities, and the savings account manages the inflow and outflow of cash.
3. Ease of Trade Settlements
An integrated account enables quick settlements, reducing the chances of payment failures or transaction delays. You can get an instant payout with a 3-in-1 system without having to wait for a T+1 or T+2 settlement cycle.
4. Ease of Managing Portfolio
Tracking holdings and booking losses and gains become easier with an integrated system. This enables better financial planning and decision-making.
5. Gain Research Insights
You can get access to shares and stock recommendations from the in-house research team of the financial institution or brokerage offering the account for better investment decision-making.
6. Affordable Brokerage
Competitive brokerage rates are offered when you go for a 3-in-1 integrated system, making investing profitable.
Alt Text: A laptop screen showing share prices
How to Open an Integrated Trading, Demat, and Savings Account?
Most Indian banks will offer a 3-in-1 account that links a Demat, trading, and savings account for hassle-free investing. Here’s how you can open one:
Step 1: Select a trusted bank in your region that offers 3-in-1 integration, online trading platforms, and the best in-house research team.
Step 2: Complete the Know Your Customer (KYC) verification by submitting your PAN, Adhaar, and bank account proof.
Step 3: Link your savings account to your trading and Demat accounts for smooth fund transfer.
Step 4: Set up your online trading credentials by creating an online login and start investing.
Conclusion
When entering the stock market, it’s essential to understand the differences between Demat vs. trading vs. savings accounts. Understanding the differences ensures seamless transactions, informed decision-making, and effective risk management. You can also choose a 3-in-1 integrated account for the effortless management of banking, trading, and portfolio monitoring under one platform. This makes trading a simple and hassle-free experience for investors.
Ready to start your investment journey? Begin with Torus Digital! As a trusted SEBI-registered broker, we help you open a Demat account and support you every step of the way through our 3 in 1 account app.
