Today, if you want to invest or to trade in stocks, you can do it online with the help of a demat account and a trading account. With the advent of the internet and its ever-expanding reach, online stock trading has become the norm. However, before the internet became mainstream, investors started investing and trading activities offline. Therefore, if you plan to start as an investor, you will benefit by knowing the difference between offline and online stock trading in India.
The Process of Online Stock Trading
You open a demat account and trading account to trade in the stock market online. The former will store and secure your stocks and investments. While the latter allows you to buy and sell stocks. So, shares are transacted and stored electronically. You can get hold of both accounts by visiting the website of a reputed stockbroker. After opening those accounts, you can access the broker trading platforms on your desktop or phone. Then, you can use the app to place a buy or sell order to make a trade.
The Process of Offline Stock Trading
Before online trading became the norm, shares existed in the physical form. So, offline stock trading involves the buyer and seller exchanging physical share certificates. However, to do that, they had to approach a stockbroker, who would carry out the trade on their behalf. So, traders would physically visit their broker to make a trade request. Then, the broker would physically execute the trade and deliver the seller’s shares to the buyer.
Difference Between Online Trading and Offline Trading
- State of the Shares
As you know, in the case of online stock trading, shares exist in electronic format. In contrast, conventional offline trading had physical share certificates in circulation. Now, in the electronic format, shares are immune to physical damage. They are nott getting misplaced. Your demat account keeps them safe. However, in the case of offline trading, share certificates could easily tear or get lost. Therefore, you would have to put in immense care to maintain them properly.
- Security
Continuing from the previous point, in the case of online trading, shares are held in your demat account. The shares in your demat account are well-protected and always authentic. The online medium has substantially improved the efficiency of monitoring stock market transactions. In comparison, in the era of offline trading, by the time you get the shares in your hand, they would have already gone through the hands of several people. Hence, producing forged shares and carrying out other malicious activities was easy.
- Convenience Factor
To start trading online, you only need a reliable internet connection and a device like a laptop or a smartphone. Then, if you possess the requirements mentioned in the previous statement, you can open your demat account and trading account. Even in trading, you place an order with a few clicks using the broker’s trading app. Then, depending on the type of transaction , shares will then get debited from or credited to your demat account after trading days.
On the other hand, offline trading requires you to rely on your broker to carry out the transaction efficiently. Finding a reliable broker was challenging back then. And lastly, even if you got hold of a reliable broker, the system itself had inherent flaws because the transaction could take several days.
- Broker’s Role
The broker’s role has gotten passive in online trading systems, so the dependency on the broker has reduced today. Today’s brokers have only to provide demat account and trading account services and keep their servers up and running. In comparison, conventional brokers played a very active role in the trade. Today, you trade using the broker app, while the broker would trade on your behalf back then.
- Trading Fees
The fees you have to incur in the form of brokerage, annual maintenance charges (AMC), and other taxes are relatively affordable in the case of online trading when compared to offline charges. That is mainly because the broker plays less of an active role in the case of online trading. Moreover, today’s investor has plenty of brokers to choose from, and brokers will not try to take advantage of the investor.
- Real-Time Data
Last but not least, the online trader gets access to real-time data. So if you are trading online, you can see real-time fluctuations in the stock price. Offline traders would not have the privilege of real-time data and would always be a step behind.
Conclusion
Online trading has multiple benefits and advantages over offline trading. Hence, most people have opened a demat account and started online stock trading in India. The online trading system has made stock market trading and investing more accessible to many Indians.
