What is a demat account?
A demat account holds your shares. A trading account places your orders. Knowing the difference tells you where your money actually sits.
Two different accounts doing two different jobs
- Trading account — used to place buy and sell orders on the exchange. Opened with a broker.
- Demat account — holds your securities in electronic form. Maintained with a depository through a Depository Participant.
Most brokers open both together, which is why the distinction gets blurred in conversation. It becomes important the moment something goes wrong.
Who actually holds your shares
This is the single most useful thing to understand. Your shares sit in your demat account with CDSL or NSDL. They are recorded in your name at the depository, not pooled in the broker's name.
You can verify your own holdings directly with the depository, independently of your broker. Both CDSL and NSDL provide investor access to holding statements, and both send periodic statements to your registered email.
The practical implication: if a broker ceases operations, securities in your demat account remain yours. You can transfer your demat account to another participant. This is exactly why the question “what happens to my shares if you shut down?” deserves a clear answer from any new broker, and why a vague one should worry you.
What a demat account can hold
- Equity shares
- Exchange traded funds
- Bonds and government securities
- Mutual fund units, if held in demat form
- Sovereign gold bonds
What it costs to maintain
Typically an annual maintenance charge, plus DP charges when securities are debited. Some brokers waive AMC for the first year or for smaller holdings. AMC is charged whether or not you trade, so for a dormant account it is the main ongoing cost.
Things worth doing once, properly
- Add a nominee. This is the single highest-value administrative task in the whole process, and the one most often skipped. Without it, transmission to your family after death becomes materially harder.
- Keep your email and mobile current. Depository statements and alerts go there.
- Read the depository's statements. They come from an independent source and are a genuine cross-check on your broker.
Apply this to us
Everything above is a test you can run on Trade Grow. We would rather you did.