When you buy mutual funds from any fund house, you can choose between getting your mutual fund units in demat account or you can hold it with the AMCs.
Please note that once mutual funds units are in demat account, investors can sell/redeem units either through stock broker or through the Exchange platform (BSE Star & NSE MFSS) or through their Depository Participant.
These days all transactions are online and you get consolidated statement of all the mutual fund investments sent through your financial advisor. In addition, CAMs also issues consolidated account statement every six months (CAS) which carries all the holdings and that too with details of different holdings patterns. Further, you can download CAMS/KARVY enabled apps to see your statements anytime and with realtime prices.
So why should an investor require the demat option?
Why Holding Mutual Fund Units in Demat Account is not Useful?
- Too Many Intermediaries – Holding mutual fund units in demat account results in more intermediaries.
- No Advisory – Demat accounts do not offer any kind of advisory services. Demat account is just a platform where you can buy and sell mutual funds, and other financial investment products like stocks or bonds and keep on paying these depository participants heavy charges in the form of annual maintenance charges, commissions and transaction fee, without getting any advisory on overall financial wellbeing.
- Charges: There are annual charges (maintenance fees) that you pay to maintain the demat account. In addition, you will incur brokerage charges, whenever you buy/sell your mutual fund units.
|Yearly Maintenance Demat Charges|
|Kotak||Rs. 600||Religare||Rs. 500||Motilal Oswal||Rs. 400|
|Sharekhan||Rs. 750||Angel Broking||Rs. 450||Zerodha||Rs. 300|
- No SWP and STP facilities – In demat account mode, investors don’t get SWP (Systematic Withdrawal) and STP (Systematic Transfer facility), which at times is required for better investment planning. However, investors can do SIP purchase.
- No Joint Account Holdings – Joint account mutual fund investments cannot be held in a single holder’s demat Account, and vice versa.
Where Non Demat Mutual Fund Holding is a Better Idea?
 Mutual Fund houses regularly mail statements to keep you posted about your investments.
 Online platforms offer click-of-mouse transactions without any annual fee.
 Investing in Liquid Funds – When it comes to liquid funds, holding units with AMCs is advantageous as crediting and thereafter the redemption of units by way of debiting takes time in case of demat format as it is executed at the DP’s end. On the other hand, liquid funds held with AMCs facilitate buying and selling on same day.
Holding mutual fund units into demat account thus becomes a pointless exercise as transacting in mutual funds without a demat statement is far more convenient and so far remains the preferred choice for majority investors.