Is Demat Account Mandatory In Mutual Funds?
- 3m0•
- 07 Feb 2023
A Demat account is mandatory for stocks but not for mutual funds.
A new product of SIP in Stocks is now being offered. This works similar to SIP in Mutual Funds. There is typically a basket of stocks and the investor can fix a specific amount to be invested in those stocks. The weight assigned to every stock might change depending on the product provider. Since this investment is in stocks, a Demat account is required.
In general, it’s advisable to have a Demat account but it ideally depends on the requirement of the investor. There are several benefits of holding a Demat account.
Benefits Of Demat Account
There are a number of benefits of holding a Demat account -
- An investor wouldn’t need to fill multiple form or documents each time they buy a fund. In other words, if you are investing in mutual funds or any other scheme you don’t need to submit separate documents of each.
- It eases the process of buying, selling, and managing funds.
- Demat offers a single statement for all mutual fund holdings across fund houses.
- With electronic holdings, there are no chances of thefts, fake shares or any other malpractices, which were noticed in physical holdings.
- Eliminates the mismatch in bank accounts and address.
However, there are a few drawbacks of holding a Demat for mutual funds.
- A Demat account has a maintenance fee. The fee varies from broker to broker. So, if you want to invest in mutual funds, where Demat is not mandatory, you can save up this cost.
- There is only one nominee option in this account. Also, an investment cannot be held jointly, if the Demat account is in the name of a single person.
If you want to invest mutual funds and are fine with the limited drawbacks, you can go for it. With a Demat, you can hold multiple investments, which can be convenient for you. If you want to open a Demat account, you can opt for 2-in-1 accounts, which act as both trading and Demat account.
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