How to Invest in Mutual Funds through Demat Account

There are several channels online through which you can invest in mutual funds schemes. Some of these channels are mutual fund websites, net banking, transfer agents such as CAMS or KARVY, online mutual fund platforms, etc. Though it is not mandatory to hold a demat account, having a demat account has its own advantages.

A number stock broking companies provide Demat facilities to their stock investors and traders. They offer an array of services that  mutual fund trading, IPO/FPO subscription, investment in tax saving infrastructure bonds (under section 80CCF), trading in international stock exchanges, investment in Gold through Gold ETF, other than the usual stock broking facilities. Demat account can also be used for post office savings schemes such as NSC and KVP. However, these are available in select cities only.

Invest in Mutual Funds

The process of investing in mutual funds through a Demat account is similar as stock investments. After applying  for KYC compliance and subscription, the Asset Management Company (AMC) or Registrar and Transfer Agent (RTA) where you have registered with will credit the mutual fund units to your Demat Account. Here are some of the pros and cons of investing in mutual funds schemes through a demat account:

Advantages:

• The transactions are convenient and paperless which helps you save the task of filling forms and providing documents every time you invest in a share.
• The mutual fund and stocks investments can be centralized at one place, irrespective of multiple schemes  across different agents.
• In case you have a single nominee, the nomination requirements are simple.
• In case you want to change your contact details  with your depository participant (DP), you have to only submit one application even though you may hold multiple investments. The updated contact information is updated, the same will automatically get upgraded with all the AMCs.

Disadvantages:

• The charges for holding and trading of mutual funds using a Demat account are a bit higher, in comparison to the ones without an account. Higher charges: Some brokerage firms may charge a fee for the actual sum and SIP investment in the scheme, as compared to online mutual fund platforms who may not charge anything for the same services.
• Only if you are stock investor who trades or invests in direct stocks, then you may find Demat accounts as cost effective and useful.
• Funds can be purchased only if the AMCs are tied-up with the brokerage firm you have registered with.
• You cannot hold a joint account for mutual fund investments with a Demat account.

For all other investments, you can do through a bank account which has online fund transfer facility. However, it is essential to wisely choose a mutual fund investment, according to your convenience and requirement.