A Demat Account is an online account that you can use to hold securities in a ‘dematerialised’or digital form. A Demat Account can be used to hold multiple types of securitiessuch asstocks, bonds, Mutual Funds, etc. Moreover, it is easy to use and offers you a lot of conveniences. However, it is not mandatory to have a Demat Account to buy Mutual Funds. Read on to know more about this.
Why do you need a Demat Account to buy Mutual Funds?
A lot of peoplewonder whether they need a Demat Account for investing in Mutual Funds. It is important to know that a Demat Account is only mandatory for investing in stocks and no other security. However, while you do not need the account to buy Mutual Funds, it can help to have one nevertheless.
Here are some advantages of having a Demat Account:
- The account offers you a common place to hold all of your investments. This makes it simpler to track and manage your money and make better investment decisions to reap good returns.
- You can get a single statement to view all your Mutual Fund holdings from different schemes from your account.
- Having an online account offers great accessibility. You can carry out fast and seamless transactions as opposed to storing your investments physically.
- A Demat Account offers better security. All your information is safely stored. There is no possibility of a physical loss or damage to important documents, certificates, etc. Moreover, using the account also minimises the chances of falling victim to a theft or a scam.
- You can add a nominee to your account to enable a smooth transfer of units tothem in the unfortunate event ofyour demise.
You can read more about the benefits of a Demat Account here.
What other options can you choose when investing in Mutual Funds?
There are some other ways to invest in Mutual Funds. For instance, you can invest directly with the Asset Management Company (AMC) or through an online provider. But each of these options can have some drawbacks. Here’s a comparison that can help you understand this better:
Directly throughan asset management company
AMCs offer the option to invest in Mutual Funds on their official websites.Simply visit the AMC’s website and select the funds you want to invest in. You will then be required to visit the AMC’s physical branch and submit an application form along with a copy of your PANcard, KYC documents, and a cheque. Once your application is approved, the company will provide you with a PIN and folio number that you can use to manage your investments.
The process may not seemtoo complicated, but if you invest in Mutual Funds of different AMCs, you will have to carry out this process individually every time you invest in a new Mutual Fund.
Through independent online portals
You can also opt for an independent provider to invest in Mutual Funds. For this, you will have to register with the portal. The registration process is more or less the same as in the case of an AMC. However, you have the advantageof being able touse a single account to manage all your Mutual Fund schemes. But it is important to verify the authenticity of the provider before you invest in any money to avoidgetting scammed. You should also check if the portal is approved by your bank for NetBanking.
Through a Demat Account
Opening a Demat Account requires you to select a depository participant (DP). Once you have selected a DP, you can submit the application form, identity proofsuch as PAN, and other important KYC documents. The DP will verify your KYC information and accordingly approve your application.
You will then receive an account number and password that you can use to access your Demat Account. This account can be used for all your investments in different Mutual Fund schemes and other securities. So, the overall management will be hassle-free and a lot more efficient.
HDFC Bank Demat Account can be ideal for investing in Mutual Funds. You also use the same account to invest in initial public offerings (IPOs), exchange-traded funds (ETFs), sovereign gold bonds(SGBs), bonds, equity, and non-convertible debentures (NCDs).
Here are some benefits and features ofhaving an HDFC Bank Demat Account :
- Fast, paperless, and seamless process for account opening (takes all of five minutes)
- Ready-to-trade account for immediate investing
- Convenient transfers of your portfolio from any DP to HDFC Bank DP
- Option to take digital loans against securities or Mutual Funds
Want to open a Demat Account? Click here to get started.
*Terms and conditions apply. This is an information communication from HDFC Bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks, read all the related documents carefully before investing.
FAQs
Mutual fund companies do not require investors to use a dematerialization (DEMAT) account to buy mutual funds. A DEMAT account allows investors to electronically purchase and redeem securities, mutual funds, and other investments.
Can I buy mutual funds without demat account? ›
A lot of people wonder whether they need a Demat Account for investing in Mutual Funds. It is important to know that a Demat Account is only mandatory for investing in stocks and no other security. However, while you do not need the account to buy Mutual Funds, it can help to have one nevertheless.
Can I invest in mutual funds through bank account? ›
If you wish to invest online through HDFC Bank, you will need to have an ISA. Investing through an ISA is simple. Just log into your account, select the scheme you need and the number of units you would like to buy, pay for your transaction, and you are done.
Is it better to buy mutual funds directly or through the demat account? ›
Advantages of Investing in Mutual Funds through Demat
One of the primary advantages of mutual fund investment through demat is the cost benefits that an investor gets. Since transactions are done digitally, an investor can save money on stamp duty. A demat account can make investing extremely time efficient.
What kind of account do I need to buy mutual funds? ›
You buy mutual funds using an investment account. You might already do this through your workplace 401(k), but you can also do so through an online broker or have a financial advisor work with you to help set up an account.
Can I buy mutual funds directly? ›
One may invest in mutual funds DIRECTLY i.e., without involving or routing the investment through any distributor/agent in a 'Direct Plan'. OR one may choose to invest in mutual funds with the help of a Mutual Fund distributor/agent in what is termed as a 'Regular Plan'.
Can I buy mutual funds myself? ›
The most common ways to buy a mutual fund online are directly from a fund provider, through an investment company, or through an online brokerage.
Which is best bank for mutual fund investment? ›
- ICICI Prudential Banking & Financial Services Fund. ...
- SBI Banking & Financial Services Fund. ...
- Invesco India Financial Services Fund. ...
- Aditya Birla Sun Life Banking and Financial Services... ...
- Nippon India Banking & Financial Services Fund. ...
- Tata Banking and Financial Services Fund. ...
- Sundaram Financial Services Opportunities Fund.
Everything is in the hands of the bank itself. All banks which sell MFs charge some or the other amount from customers like 0.5% of the total AUM (Assets Under Management),” said a chief executive officer (CEO) of an investment advisory firm.
How much money is needed to open a mutual fund account? ›
Many mutual fund minimums range from $500 to $3,000, though some are in the $100 range and there are a few that have a $0 minimum. So if you choose a fund with a $100 minimum, and you invest that amount, afterward you may be able to opt to contribute as much or as little as you want.
Disadvantages of Investing in Mutual Funds through Demat
Regardless of the number of securities, the charge needs to be paid. Since dematerialization is heavily reliant on technology, it requires an investor to have access to the internet and a device to manage their mutual fund investment.
What is the best way to buy direct mutual funds? ›
You could invest in a Direct Plan online through the websites of the respective mutual funds or via online platforms of stock exchanges platform or Mutual Funds Utility (MFU) or other various digital channel. There are also a few online portals which offer a facility to invest in Direct Plans.
What are the disadvantages of buying a mutual fund through a broker? ›
Disadvantages include high fees, tax inefficiency, poor trade execution, and the potential for management abuses.
Can I buy a mutual fund without a broker? ›
Key Takeaways. Mutual funds can be bought and sold directly from the company that manages them, from an online discount broker, or from a full-service broker.
How do I purchase a mutual fund? ›
Mutual funds can be purchased through online brokers or through the fund manager themselves. But there are some differences between the way mutual funds trade and the way a stock or ETF trades. Pricing. Mutual funds are priced at the end of each trading day based on their net asset value, or NAV.
Can I buy SIP without demat account? ›
As a result, the short answer to this question is no, you do not need a Demat trading account to invest in SIPs. Due to significant technological advancements, having a Demat account is no longer required to begin your SIP investment journey. Only if you want to invest in the stock market do you need a Demat account.
Can we invest in mutual funds through Zerodha without demat account? ›
You are just one click away from buying any mutual fund after logging into the platform. To login use your trading (Kite) login ID and password. Currently mutual fund purchases are enabled for only those clients who have Zerodha demat account (Not IL&FS or any third party demat account) mapped to the trading account.
How do I open a mutual fund account directly? ›
The first way is to visit the nearest office of the Asset Management Company whose fund you have selected. Once you reach the centre, you will be asked to complete your KYC (Know Your Customer) process if you are not KYC compliant. The KYC document can be procured at the AMC branch.
How can I buy index funds without a demat account? ›
How Can I Buy Index Funds Without A Demat Account?
- How To Invest In An Index Fund. You can make investments in mutual funds either through a direct plan or a regular plan. ...
- Investing Through AMC's Website Or Office. ...
- Independent Portals. ...
- Mutual Fund Distributors/Agents. ...
- Banks. ...
- MF Utility. ...
- ET Money App.
