Investment in MF schemes through demat accounts is useful and cost effective for those investing in direct stocks
A demat account for mutual funds (MFs) is similar to that for shares. On subscription, the asset management company (AMC) or registrar and transfer agent (RTA) will credit the MF units to the investor’s demat account.
It helps in consolidation of all holdings. The investor need not go through several statements. Holding MF units in the demat format enables one to manage portfolio better. Buying and selling in dematerialised units is supposed to be faster and simpler. The option helps those having demat accounts and want a single statement for holdings.
Changes in contact information can be easily carried out. Instead of multiple applications to change address, just one application for the multiple investments to the depository participant (DP) is needed. Once the change is updated with the DP, the same will get registered electronically with all the AMCs and RTA.
Another benefit is free transfer of units in nominees’ accounts, except in case of tax-saving funds.
However, trading and holding mutual funds schemes through demat account is slightly expensive. Most brokerage houses charge a flat fee for both lump sum and systematic investment plan in MF schemes unlike the online mutual fund platforms.
Investment in MF schemes through demat accounts is useful and cost effective for those investing in direct stocks. One can purchase and hold units of schemes of only those AMCs with which the investor’s brokerage house has a tie-up with.
Joint-account mutual fund investments cannot be held in a single holder demat account, and vice versa.
For online investments, the investor needs a bank account with online funds transfer facility. Thus, choosing investment channel becomes imperative.
The writer is chief investment officer, LIC Mutual Fund
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