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Opening a Demat Account to Invest in Mutual Funds

A Demat account is an electronic facility for holding additional securities under one roof. It is a compulsion set by the SEBI for opening a Demat account to enter the share market trading. But it is not compulsory to open a Demat account for buying, selling, or managing mutual funds. 

The advancement of technology has effectively removed the compulsion of opening a Demat account for investments in mutual funds, including the SIP options. You can buy mutual funds directly via AMC (Asset Management Company), personal finance advisor, bank, or other third-party portals. While you need not compulsorily have a Demat account for managing the mutual funds, there are a lot many advantages of having one :

  • It becomes more accessible and safer to gold securities when compared to the previous method of relying on physical certificates 
  • Electronic book-keeping is a quick and automatic way to update accounts
  • It is convenient to increase the speed at which a mutual fund is processed as the paperwork is eliminated

Mutual funds can be bought either from the company directly or from a Demat account.  Purchasing a mutual fund directly from the company bypasses the use of a Demat account or a broker. You get an additional control, accountability and responsibility for the mutual fund trading. For buying directly from the company, the mutual funds make the form available for you to fill and send to the company to request shares. After redeeming the shares, the money received from sales is directly sent to your bank account.

On the other hand, buying a mutual fund through a Demat account is also available. The online gateway makes the selection, review, and comparison of funds easy for those who prefer managing your accounts by yourself. A Demat account favours electronic management of mutual funds. You will also get a consolidated view of all the securities held in the Demat account.

Besides this, the other ways to invest in mutual funds include :

Broker on the stock exchange

This involves a Demat account. It is convenient to invest in bonds, mutual funds and stocks to see all your investments in one place. The transaction fee and annual fee is charged based on the type of Demat account one holds.

Through AMC

You can invest in Mutual Fund via an AMC (asset management company) website directly. But this is possible if the investment is only for one AMC. Investing in only one AMC restricts diversification. The company tries promoting their mutual funds instead of laying various other options that might prove effective for shielding against risk.

Offline distribution

Various offline distributors offer a host of mutual funds to invest in. The offline investment handles the physical form of shares, that is, certificates, and they'd deal in paper acknowledgements.

Online distributors

Online distributors offer a paperless experience along with full tracking and other relevant controls. It's easy for you to track the investments in one place, making it easier to decide the redemption. The service is free of cost for you. 

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. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

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