Have you decided to invest in public securities and stand a chance to earn returns? If yes, you need a few resources to invest in public securities and investment vehicles. For example, you need a smartphone, tablet, or other media device to indulge in online trading. Offline trading might be hectic in today’s digital era. The next thing you need is a trading account, also known as an investment account. You must also choose the right investment account type to suit your investment strategies. Let us discuss what is an investment account and its types.
Demystifying trading accounts
An investment account is mandatory for buying and selling securities on stock exchanges. As per SEBI guidelines, one cannot buy or sell securities without a trading account. An investment account allows you to browse stocks, bonds, commodities, derivatives, and other securities available on stock exchanges. Some of you might think of Demat accounts as similar to investment accounts. Contrary to your belief, Demat accounts and different from investment accounts. Where an investment account helps buy or sell securities, a Demat account holds them in digital format. Usually, your investment account is linked with the Demat account for a quick transfer of securities. Your stockbroker might embed your investment account within a trading platform that offers research support.
Types of trading accounts in India
Now that you understand the trading account meaning, here are its types:
Equity trading account
You can invest in futures and options contracts with equity investment accounts. It also allows you to buy and sell stocks in the market. When investing in stocks, you need a Demat account to take delivery. However, you might not need a Demat account when investing only in futures and options contracts. An equity trading account is perfect for investors looking to expand their stock portfolio.
Margin investment account
Not every investment account will come with a margin trading facility. A margin investment account allows you to borrow funds from your stockbroker. Since you will have additional funds, you can make bigger investments in the stock market.
Commodity trading account
A commodity trading account will give access to agricultural, energy, industrial, and other commodities. You will be buying financial contracts of different commodities with an investment account.
3-in-1 investment account
As discussed above, your investment accounts will be linked with the Demat account for seamless transfer. Such an account is referred to as a 2-in-1 investment account. Some brokers might link your investment account with both Demat and bank accounts. Such an account is called a 3-in-1 investment account.
Share trading account
Some investors might explicitly want to invest in shares. In such a case, they can go for a share trading account, where other trades aren’t allowed. However, you will restrict your investment abilities with a share trading account.
Conclusion
It is essential to explore different types of investment accounts. Choose one that suits your investment needs and strategies. It is ideal to choose an investment account that allows you to invest in a wide range of securities. Choose your investment account right away!
Summary
There are several investment account types for traders, from margin to share trading accounts. Investors must choose an investment account that allows them to invest in multiple securities and focus on portfolio diversification. Choose your investment accounts and start trading right away!