Demat vs. Trading Account: Which Comes First?


When it comes to venturing into the world of investments, opening a demat & trading account is the first step investors take. However, within this process lies a crucial decision: should you open a demat account first or a trading account? Understanding the dynamic relationship between these two accounts and the factors that influence this decision can significantly impact your investment journey.

The Interconnectedness of Demat and Trading Accounts

Before diving into the question of which account to open first, it’s essential to grasp the symbiotic nature of demat and trading accounts. A demat account, short for “dematerialized account,” is where your securities are stored in electronic format, eliminating the need for physical certificates. On the other hand, a trading account facilitates buying and selling securities in the stock market. These two accounts are intricately linked: the demat account acts as a repository for your securities, while the trading account enables you to execute transactions.

The Order of Establishment: Demat or Trading Account?

The decision of whether to open a demat or trading account first depends on your investment goals and strategies. Consider these scenarios:

  1. Opening a Demat Account: For investors focused on building a diversified portfolio and holding securities for the long term, starting with a demat account can make sense. It provides a secure space to store your investments, and you can open a trading account later when you’re ready to start actively trading.
  2. Opening a Trading Account: If you’re interested in active trading and capitalizing on short-term market movements, opening a trading account first might be more suitable. This approach gives you immediate access to the stock exchanges and allows you to execute trades swiftly.

Starting with a demat account has its advantages:

– Building a Repository: A demat account provides a consolidated space for your investments, streamlining the process of managing and tracking your holdings.

– Ease of Transactions: When you decide to start trading, having a demat account already in place ensures seamless execution of buy and sell transactions.

– Secure Storage: Physical certificates can be vulnerable to damage or loss. A demat account eliminates these risks by storing your securities digitally.

Opting for a trading account first has its perks as well:

– Immediate Access: If you’re keen on trading actively, a trading account provides instant access to the stock exchanges, enabling you to act on market opportunities.

– Active Trading: Opening a trading account first aligns with a strategy of capitalizing on short-term market movements through frequent buying and selling.

– Market Familiarity: Engaging with a trading account exposes you to the dynamics of the market, helping you gain insights into trends and patterns.

Simultaneous Opening of Demat and Trading Accounts

The idea of a three-in-one account stands out as a notable choice. This integrated account combines a demat account, trading account, and bank account. It streamlines the process of transferring funds and securities between accounts, providing a comprehensive solution for both long-term investment and active trading strategies.

Factors Influencing the Decision

Several factors come into play when deciding which account to open first:

– Investment Goals: Are you aiming for long-term wealth accumulation or short-term gains through active trading?

– Risk Tolerance: Active trading often involves higher risk compared to long-term investing. Your risk tolerance will influence your approach.

– Trading Frequency: How frequently you intend to trade plays a role in determining which account to prioritize.

– Brokerage Services: Different brokerages offer varying fee structures and services, which can impact your decision.

Practical Steps for Opening Demat and Trading Accounts

To open these accounts, follow these steps:

  1. Research Brokerages: Choose a reputable brokerage that aligns with your goals and preferences.
  2. Documentation: Complete the necessary paperwork and provide identification documents as required.
  3. KYC Process: Fulfill the Know Your Customer (KYC) requirements.
  4. Account Activation and Funding: Once your accounts are approved, fund your trading account and start investing or trading.


In the dichotomy of opening a demat or trading account first, there’s no universal answer. Your decision should be guided by your unique investment goals and strategies. Whichever route you take, remember that the interconnectedness of demat and trading accounts means they often complement each other in your investment journey. As you embark on this exciting endeavor, consider using a reliable share market app to stay updated with real-time data, trends, and trading opportunities. Your decision today can set the tone for a successful and rewarding experience in the world of investments.