What is the best way to have a Demat account and not a Trading account?

When investing in the stock market, most investors are aware that trading and investing in stock markets requires a trading account and a demat account . It is not clear if trading without a Demat account or vice versa is possible. For traders to be successful in stock market trading, they will need both of these accounts. Both accounts serve a unique purpose and have different applications.

What is the fundamental difference between trading and demat accounts?

A trading account allows you to trade and buy shares on stock exchanges. A trading account is required if you want to place orders on the stock exchange. The demat account, which is short for dematerialized account, is a similar account to a bank account. A demat account is designed to secure your stocks, just as you would with a savings account. A demat account allows investors to deposit their stock. Investors can store the stock they have purchased in a demat account. When it is time to sell, investors can withdraw the stock as they wish.

A demat account stores stocks, while a trading account allows for transactions on the stock exchange. Both accounts are therefore intrinsically linked. It's very difficult to use one account without the other, and brokers will often encourage you to open a trading or demo account. It is not necessary to open them both at once. You can trade with a demat account only, and vice versa.

If You Want to Invest in Mutual Funds

Demat accounts allow for easy and paperless buying and selling of shares. A demat account comes with transaction fees and annual charges for each withdrawal or make of an investment. This adds to the investment cost and places restrictions. Investing in mutual funds can help investors avoid these extra charges. Mutual funds can be purchased and sold without the need for a demat account. Individuals can easily make or withdraw investments via the mutual fund website and third-party platforms.

If You Want to Deal In Physical Shares

Investors may only want physical shares, such as share certificates. Digital transformation has occurred in the way that shares are bought and sold through demat accounts. Some investors prefer physical shares to be traded the traditional way. A demat account is not required to trade physical shares.

Convert Physical Shares into Demat

A trading account is not required for investors who wish to convert their physical shares into their demat holdings. Investors must submit a Demat Requisition Form with original certificates to their depository participant in order to convert their holdings. The depository participant will request that the physical shares be transferred to your demat account through the registrar/transfer agent (RTA). The physical shares will be transferred into your demat account once the RTA has approved them. You will need a trading account in order to be able to sell these shares in the future. A trading account might be an option depending on the share price.

Receive Online Shares

A demat account is required to receive online shares as a gift, or as part of an inheritance. A trading account is not necessary if you plan to keep these shares for a long time. A trading account is required for the sale of these shares. Let's take a look at an example to better understand the situation.


Although your uncle gave you shares, you have not traded stock. A broker has instructed you to open a demat bank account in order to receive the shares. You decide to keep these shares as you don't have any funds at the moment. You don't need a trading account to hold these shares.

If You Want To Trade in Futures and Options

However, it is possible to trade share without a demat account in certain situations. You don't need a demat account for investments such as options and futures. This is because options and futures are cash-settled and don't result in the delivery of online demat account. This applies to non-equity assets such as government bonds, gold bonds and other. A demat account is required if you intend to trade in equity assets. SEBI regulations require that all equity trading must be conducted in a trading-cum demat account.

Final Thoughts

It is important to understand all nuances of stock trading before you begin investing. Although it is possible to have a trading or demat account, there may not be a greater benefit to investors. A trading account that includes a demat account is a great way to ensure your stock can be transferred and delivered easily. Trading options will be limited if you only have one type of account. A trading account is required in order to trade your shares after an IPO. There are many viable strategies that you can use to save money on trading account fees or changes.

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