Is Demat Account Necessary for Investing in Mutual Funds?

A demat account holds the shares and certificates of an investor in electronic form. To trade or invest in stocks, a demat account is a primary requirement. However, to start investing in mutual funds, it is not compulsory to have a demat account. But if you want to invest specifically in Exchange Traded Funds (ETFs), it is mandatory to do so via your demat accounts.

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Ways to Purchase Mutual Funds

Mutual Funds can be purchased directly through the fund house’s website, broker, distributor, or through a broker on the stock exchange. Earlier, while purchasing mutual funds through the exchange, it was compulsory to have a demat account. However, mutual funds can now be purchased through a registered dealer or broker on the exchange without opening a demat account, of course, bearing the ETFs.

How to Purchase Mutual Fund through Demat Account?

To purchase a mutual fund in the demat account, you must have one. Read to know how to open a demat account. Through a demat account, you can purchase mutual fund units via the application form or opt for purchase through a broker on the stock exchange.

Importance of Demat Account

Even though the demat account is not compulsory for purchasing mutual fund units, but investors having stocks in a portfolio can see their holdings in one place. NSDL or CDSL shall issue a consolidated account statement (CAS) to the demat account investors regarding their holdings and mutual funds held in the account form statement. Mutual funds purchased through demat accounts attract a cost of demat transactions, and it varies depending upon your depository participant. Demat account also provides the benefit of the paperless transaction and simplified nomination requirements.

The redemption period of mutual funds in the demat account is 2-3 days. The name of the demat account holder and mutual fund investor must match. Otherwise, redemption won’t be possible. However, with the recent changes, transacting in mutual funds without a demat account is an easier and most preferred choice for the investors.

Other Outlet to Purchase Mutual Funds

Investors can also purchase mutual fund units from banks. Several online providers give the service of mutual fund purchase. In the end, it is up to your choice from where you want to purchase the mutual funds.

Investors looking for a one-stop solution for purchasing shares or mutual funds can contact Kotak Securities, who ensure that investors are benefitted not only from the cost front but also have a seamless experience.

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