There are numerous investment products available for investors, such as shares, commodities, bonds, fixed deposits (FDs), and exchange traded funds (ETFs), among many others. However, one of the most popular investment products in India is mutual funds.
Investing in mutual funds has several benefits. It provides a high degree of liquidity, thus allowing you to get in and out without any hassles. Besides, you may also diversify your holdings without having to spend a huge amount on creating individual portfolios. Diversifying your portfolio, in turn, helps in reducing risk. You may, therefore, invest in mutual funds and build your wealth considerably.
How to invest in mutual funds without a demat account
Many are under a pre-conceived notion that having a dematerialization account is necessary to invest in mutual funds. However, such is not the case. Having such an account is mandatory while trading in equity shares. With advancement in technology, stock exchanges introduced platforms to make investment in mutual funds, as well as other vehicles such as corporate FDs, bonds, and National Pension System (NPS), besides others.
Whether or not to trade through a dematerialization account depends on your requirement and understanding of the financial product. You may purchase your mutual funds through a broker or a fund’s house online site. In order to do so, you have to submit the necessary documents, such as a duly filled application form, your PAN details, and a blank cheque verifying your bank details. Upon completion of all the required paperwork, you may buy the mutual fund.
Once you make the purchase, you receive a certain number of units. These units are reflected in an account statement. The statement also contains other details of your investment, such as current value of the mutual funds as well as purchase value. You may request for a statement either through the Internet or from your Asset Management Company (AMC).
Benefits of investing in mutual funds with a demat account
Alternatively, you may choose to buy mutual funds through a demat account. The entire process of investing becomes much simpler. Besides, the need to fill up the application form is eliminated. You may simply send a buy request over the online trading account, and make the purchase.
There are numerous benefits of investing through a dematerialization account. Following are seven reasons why investing via a dematerialization account is advisable.
- Single statement
If you choose to invest through multiple brokers or fund house’s online sites, you receive numerous statements. Maintaining and understanding multiple statements may be quite a cumbersome task. On the other hand, having a dematerialization account ensures that you receive a single statement for all your mutual fund holdings. This consolidation allows you to view and manage your portfolio quite easily. You no longer have to check multiple account statements from numerous fund houses.
- Ease in transferring units
Having a dematerialization account provides the benefit of ease of transfer in an unfortunate event of your demise. The mutual fund units may then be transferred to your nominee’s account without any hassles.
- Paperless transactions
A major benefit of investing in mutual funds through a dematerialization account is that it eliminates the need for any paper transactions. The undertaking is done through the Internet, thus preventing any inconvenience.
- Single nomination facility
You may have investments in numerous financial holdings. Trading through a dematerialization account provides the benefit of a single nomination facility for all your investments.
- High degree of convenience
As opposed to trading through brokers, investing through the Internet offers a high degree of flexibility and convenience. You may purchase mutual funds with a mere click of the button.
- Single entity to be notified in an event of change of details
A change in address would mean submitting multiple applications to various fund houses. However, you have to simply notify a single entity if you trade through a dematerialization account. You just have to submit a single application to your Depository Participant (DP) for requesting a change in address.
- Low transaction costs
If a large number of investors trade through a dematerialization account, fund houses have to spend less towards operational costs. The amount spent on generating physical statements and posting of such statements is reduced. The benefits may then be passed on to the broker or the investor, thus reducing the transaction cost to a great extent.
Trading through a dematerialization account offers a host of benefits. It is indeed a convenient option for those who prefer a systematic financial planning approach. You may, therefore, compare the pros of investing either through a demat account or through a broker or a fund house, and choose the option that best suits your needs.