How to Invest in Mutual Funds Without Demat Account?

Elimination of the traditional trading process in stocks has led to the use of Demat accounts. It has enabled you to hold securities in an electronic format. The Securities Exchange Board of India (SEBI) mandated the use of a Demat account for entering the share market. However, you can consider specific investment options if you do not have a Demat account.

Additional Read: What is Demat Account, its Meaning, Type, and Process

Mutual funds are an apt investment option when you do not have a Demat account.

Ways to Invest in Mutual Funds

Mutual Funds are an investment basket that consists of assets. These assets are purchased from the funds raised by investors. When you invest in a Mutual Fund unit, you are investing through one platform in multiple asset classes that include equities, bonds, commodities, etc. The returns that these asset fetch are then proportionately distributed among the investors as per the unitholding. Mutual Funds are an extensively sought out investment vehicle as it offers the benefits of diversified investment. You can invest in a Mutual Fund with and without a Demat account.

Today, we will discuss the ways to invest in mutual funds without a Demat account. Here are how it can be done,

Through AMC office or website

Many mutual fund companies mention and promote their products online. One physical visit to the fund house is necessary if the company mandates it. Then an application form and a copy of the PAN card, KYC documents, and initial cheque amount are submitted. A PIN is then allotted for further transactions, along with a folio number. The drawback here is the repetition of the application process with each fund house approached by you.

Independent Portals

Different independent portals provide lists of mutual funds. Online registration is needed for opening an online Demat account. You can take a printout of the application form and submit the same. The portal also does the KYC if not done earlier. You can quickly sell and buy the funds after the login is created. The problems here can arise only when the portal is not linked with the bank. 

Additional Read: Features And Advantages Of Opening A Demat Account  

Through Registered Mutual Fund Adviser

Numerous mutual fund agents are register with AMFI (Association of Mutual Funds in India). A list of these agents is found on the AMFI website. These agents may pay a visit to your home for further guidance through the various options. They might also submit the forms for the investor. The best way to look for good agents is to filter a few based on their experience, knowledge, and qualification. The one possible problem here is the challenge to find an active agent. Registered, but inactive agents might not help differentiate between good and evil schemes.

Transfer Agents

If you are unwilling to visit each AMC or find the right advisor, you can invest through transfer agents. They act as an intermediary between the mutual fund company and the person. Transfer agents do not charge any money and offer information on new funds and schemes. They are one-point contact for submitting different forms.

Banks

The most popular way of investing in mutual funds is through banks. Banks are also mutual fund agents, and they are the best to consider when you are sure about which mutual fund to buy.

Investing in Mutual Funds using a Demat Account

Technically you do not need a Demat Account to invest in Mutual Funds. However, it is advantageous to have one. The account allows you to easily purchase and redeem Mutual Fund units through online platforms. This gives you a chance to make the most of quick market opportunities and promises maximum convenience.

The Demat Account enables investors to conveniently monitor and modify their Mutual Fund portfolio. With the account, investors can easily track the total value of their equity investments without having to switch between multiple tabs. The Demat Account statement provides a comprehensive overview of all equity holding transactions.

It is recommended that all investors regularly review their Demat Account statements to stay up to date with their transactions. This helps them gain a better understanding of share price movements, enabling them to make informed trading decisions.

Benefits of a Demat Account

• Maximum security – Physical certificates are prone to wear and tear, stolen, forged, or misplaced. A Demat Account eliminates all such risks. It holds all your share certificates in an electronic format, assuring maximum security.
• Quick Transactions: Demat accounts enable faster transactions of shares and securities as they are paperless and digital.
• Seamless Portfolio Management: You can keep track of your investments easily and manage portfolios effectively through a demat account.
• Automatic Transfer of Benefits: Demat accounts allow investors to receive their share benefits like dividends automatically in their accounts quickly.

Conclusion

A Demat account is not needed when the account is opened with the only intention of holding non-equity assets like ETFs and gold. You do not need a Demat account to trade in ETF and gold ETF. Trading in Futures and Options can also be done without a Demat account. These transactions can be done through the trading account. However, it is essential to note that you cannot hold shares in a Trading account.

Disclaimer

ICICI Securities Ltd.(I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  PThe contents herein above shall not be considered as an invitation or persuasion to trade or invest.  Investments in securities market are subject to market risks, read all the related documents carefully before investing. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents are solely for informational and educational purpose.