Most frequent questions and answers
In India, organizations related to the Capital Markets are controlled by a governing body such as SEBI. The Depositories and Stock Exchanges are the two main type of organizations that will help you to do trading. Depositories help with the creation of a Demat Account and Stock Exchanges facilitate the trading of shares.
Who are the regulators in the stock market?
The responsibility for regulating the securities market is shared by:
- Department of Economic Affairs (DEA)
- Department of Company Affairs (DCA)
- Reserve Bank of India (RBI)
- Securities and Exchange Board of India (SEBI)
Demat Account or dematerialised account provides facility of holding shares and securities in electronic format. During online trading, shares are bought and held in a Demat account, thus facilitating easy trade for the users. A Demat Account holds all the investments an individual makes in shares, government securities, exchange-traded funds, bonds and mutual funds in one place.
- Lower risks
- Easy holding
- Odd lots
- Reduced costs
- Reduced time
Physical securities are risky due to thefts, losses, or damages. In addition, bad deliveries or fake securities pose further risks. These risks are completely eliminated with the opening of a Demat account, which provides holders with the option of holding all their investments in electronic form..
Maintaining physical certificates is a tedious job. Moreover, keeping track of their performance is an added responsibility. Demat account holders can make it more convenient to hold and track all their investments through a single account.
With physical certificates, buying and selling were possible only in the specified quantities. The convenience of dealing with odd lots or single security was also not available. Demat accounts eliminate this issue.
Physical certificates involved several additional costs, such as stamp duty, handling charges, and other such expenses. These extra expenses are completely eliminated with Demat accounts.
Due to the elimination of paperwork, the time required in completing a transaction gets reduced. The reduced time requirement enables the account holder to make more purchases and sales of security holdings in a shorter time and with greater efficiency.
Demat accounts are simple, fuss-free and extremely lucrative. In today’s day and age, they are a must for financial planning.
The key difference between a Demat and a Trading account is that a Demat account is used to hold your securities such as your share certificates and other documents in electronic format whereas a Trading account is used for buying and selling these securities in the stock market.
Although a Demat account and a Trading account have two different purposes, they are closely related. In fact, your actual stock market activity is a close interplay between your Trading account, Demat account, and your bank account.
The combination of Trading and Demat account is popularly known as a 2-in-1 account in the stock market terminology.
Differences between Online and Offline Trading Accounts
With an online share trading account, the users can place their own orders. On the other hand, an offline account means that users need to avail the services of a broker to place orders. Instructions are specifically given to the brokers in an offline trade, which creates dependence on the broking agency. Such dependence is non-existent when you choose to trade through an online account.
An online stock trading account is a good option for people who have an Internet connection and track their orders from the convenience and comfort of their homes or offices. In case users are not able to access stock broking sites or do not have access to an Internet connection, placing orders on the phone with their brokers is more advisable.
Because online share trading provides users complete control over the transactions, the risk of potential frauds is eliminated. There are certain instances when the brokers execute trades on behalf of their clients without receiving permission, which can cause significant losses to the users who choose offline trading.
Expertise and Knowledge:
When users opt for an online stock trading account, they may get carried away. Without doing proper research and understanding more about how the stock market works, they may buy or sell shares, which can result in huge losses. This is avoidable with offline trading because the brokers have several years of experience and knowledge, which can be beneficial for users as they receive accurate guidance through the broking service providers. Fortunately, most of the agencies that offer online trading services offer access to research reports and other technical and fundamental analyses to assist account-holders to gain a deeper understanding to make the right investment decisions.