Technology

Do we need to open a Demat account for investing in mutual funds?

Technology advancement in the area of stock marketing has done a lot of wonders. Many things in this field have changed, including buying and selling shares. Unlike the past decades, today, you can use an account to hold your shares digitally. With this account, you will get the privilege to open free Demat account online and use it to make your investment in the stock market.

Some of the portfolio investments you can hold or store in this account include government securities, shares, mutual funds, bonds, and many others. Due to the presence of this account nowadays, stockbroking companies offer almost all the services for the Demat account holders despite the type of investment they have.

Putting that into consideration, one of the burning questions that have to be addressed in this article is if you need to open a Demat account for investing in mutual funds? Now let’s explore if it is necessary or not.

What is a Demat account in mutual funds investment?

Demat account in mutual funds investment is the account that you use to hold the securities, in this case, the mutual funds in a digitalized or dematerialized form. With these options, many stock brokerage companies can offer you a free Demat account online, where you can use it as you trade on the stock markets.

Once you have the account, you will be able to hold all your mutual fund’s shares in your investment portfolio in an electronic form without you having a physical certificate to specify the ownership.

This account also comes with other benefits that will benefit you as a mutual funds investor. Now let’s check if it is a must for you to open one for yourself to trade with the mutual fund or not.

Do you need a Demat account to invest in mutual funds?

The answer to this question is no. It is not a must for an investor to have a Demat account to redeem or purchase mutual funds shares. However, there are many reasons that you, as an investor, may consider using the Demat account over the other methods available. 

For instance, when you have a Demat account, you may invest in mutual fund shares using the digital way without the help of brokers who may charge you a fee for their services. Also, it is easier for you to hold the mutual funds than you could have using the traditional methods. You may avoid other fraud that fraudsters can do to the investors like fake certificates, theft, and many others.

The account acts like your electronic bookkeeping, where most of the tasks are accomplished automatically, and the process of trading with the mutual funds is much higher than you could trade with the other ways.

With the Demat account, you will get various ways to manage your account, then leave this operation to be done by the broker on your behalf. As an investor, you can review your funds, compare the funds, select funds, and many other functionalities. However, you can also have the Demat account but give it to the broker and assist you in managing it. 

Since it is not a must you make your investment with mutual funds using the Demat account, there are other options that you can use like: direct from the company, broker, offline or online distributors, and private banks.

Conclusion

It is not a must to have a Demat account to start investing in mutual funds as an investor. You can redeem or purchase mutual fund shares in other ways. However, note that the Demat account has various benefits that you cannot get with other methods.

Therefore as an investor, you may consider this option if you see it the best for you. You will avoid many drawbacks or might face the other methods. If you are read, you can start with a free Demat account online and see how it benefits you.

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