Do You Need A Demat Account For Investing In Mutual Funds?

Published on Jul 27, 2022 05:42 PM IST

With a Demat account, investors do not need to keep physical fund certificates to redeem shares

Demat accounts provide numerous advantages to investors when purchasing mutual funds.
Demat accounts provide numerous advantages to investors when purchasing mutual funds.
ByHT Brand Studio

Dematerialization (DEMAT) accounts aren't required for investors to buy or sell mutual fund shares, but numerous benefits exist. Demat accounts allow investors to purchase mutual fund shares without the assistance of a broker by transferring funds electronically

With a Demat account, investors do not need to keep physical fund certificates to redeem shares.

Directly Purchasing Mutual Funds from the Firm

Generally, mutual fund share purchases can be made quickly and easily through Demat accounts. However, mutual fund shares may be purchased by investors directly from the mutual fund company. By bypassing a Demat account or a broker, investors can trade now.

Investors can gain more control, responsibility, and accountability over their mutual fund trading by contacting the fund company directly.

Forms for requesting the purchase of shares are made available by mutual funds, and investors can fill them out and send them to the company. When you sell your shares, you can have the money deposited directly into your bank account after the transaction. For those who prefer, you can also have a check sent to a specific address.

Through Demat Account Buying Mutual Funds

Before the Internet and widespread personal computers, investors would receive physical certificates for the stocks and other investments they purchased. On the other hand, investors can now use a Demat account to do away with the need for physical certificates. Electronic bookkeeping lets investors buy, hold, and sell mutual funds online.

A broker can approach investors to manage their mutual fund account, but a Demat account gives them an alternative. An online gateway is used to make fund selection, comparison, and review more accessible for investors who prefer to manage their accounts.

DEMAT Account Advantages

Demat accounts provide numerous advantages to investors when purchasing mutual funds. Compared to the previous method, which relied on physical certificates, one of the primary advantages is that it is a simpler and safer way to hold securities. Paper certificates can be lost, stolen, or damaged, making them less secure than digital certificates. Investors can be duped by criminals using fictitious certificates.

With electronic bookkeeping, investors can have their accounts updated automatically and quickly. Trading can be done more rapidly and error-free if mutual funds use technology to reduce paperwork and human error.

Does a Demat account need to be set up to invest in mutual funds

Although there are some flaws from a financial planning perspective,

Many people don't understand why they need to open Demat account to invest in mutual funds. Mutual fund investments do not necessitate a Demat account, which has numerous advantages.

There are no physical certificates

Investing in stock market securities is more accessible with a Demat account because physical certificates are no longer required to be kept on hand. There is no need for a Demat account in the case of mutual funds because there are no physical certificates, and all records are controlled electronically. The mutual fund agency gives each investor a folio number, which functions as a Demat account for transferring all fund-related information to that investor. The Demat account is useless when investing in mutual funds because there are no physical certificates to keep safe.

Accounts for trading are not required

Those investors who want to invest in a mutual fund must open a trading account with a brokerage firm, which is unnecessary work. In reality, it imposes several restrictions and raises the cost of capital. To invest or withdraw money, you must fill out a paper form on the mutual fund's website or on one of the many third-party websites that offer this service.

Investing from A Broader Perspective

Having a single screen to view all of your investments is a significant selling point for a Demat account. Because the NSDL now provides investors with a comprehensive view of their investments, including mutual funds, this justification is no longer relevant. Conversely, demographic accounts limit your options and increase the cost of mutual fund investments. You can invest in mutual funds through mutual fund apps easily.


Until recently, you needed a Demat account to purchase mutual funds through an exchange. On the other hand, investors in mutual funds no longer require a Demat account. Net banking is a convenient way to make mutual fund purchases. It is the most popular method of purchasing mutual funds among investors.

Details about an investor's holdings, such as the purchase price, the number of units purchased, and the current value, are included in mutual fund accounts. It is more convenient for investors to buy and sell mutual funds without opening a Demat account.

Disclaimer: This article is a paid publication and does not have journalistic/editorial involvement of Hindustan Times. Hindustan Times does not endorse/subscribe to the content(s) of the article/advertisement and/or view(s) expressed herein. Hindustan Times shall not in any manner, be responsible and/or liable in any manner whatsoever for all that is stated in the article and/or also with regard to the view(s), opinion(s), announcement(s), declaration(s), affirmation(s) etc., stated/featured in the same.

Story Saved
Saved Articles
My Reads
My Offers
Sign out
New Delhi 0C
Friday, February 03, 2023
Start 15 Days Free Trial Subscribe Now
Register Free and get Exciting Deals