Invest in mutual funds through your demat account

Most people have a long list of life goals: buying a home, starting a business, saving for retirement, travelling abroad. But to reach those goals, you need to start saving up.

When it comes to building a sizeable investment corpus, mutual funds can help—provided you invest in them regularly and over the long term. You could even work towards achieving all your targets simultaneously, by linking separate mutual fund investments to specific goals. Digitisation has made investment in mutual funds quite simple. And if you have a demat account, that makes it easier still.

Since March 2019, it has become mandatory for stock traders and investors to hold a demat account. The demat account information helps make stock trades and investments transparent and more secure. If you have no plans of investing in the stock market directly, you might be reluctant to start the demat account opening process. But if you are planning to put your money in mutual funds, a demat account could bring some big benefits.

What is a demat account?

In simple terms, it is an account that holds securities in dematerialised (electronic) form. Demat accounts are widely associated with trading in stocks and shares. However, they can also be used to hold bonds, government securities, exchange-traded funds, and mutual fund units.

Benefits of using demat accounts

Demat accounts have gained popularity for many reasons. Here are some of the perks of holding a demat account:

  • Less risk: Storage of physical investment certificates can be risky. They could get damaged, stolen, or forged. Demat accounts reduce such risks as the certificates are held in digital form.
  • Reduced documentation: Since everything happens online, even transaction records for buying and selling assets are stored digitally. The associated transaction costs have dipped as a result.
  • Consolidated holdings: Worried about keeping a track of all your investments? With a demat account, you get a comprehensive view of your entire investment portfolio in one place.
  • Quick and easy transfers: No more waiting for days for the transfer of your securities. Dematerialised securities are transferred within minutes.
  • Speedy settlement: The disbursal and settlement of funds and corporate benefits such as dividendsare faster through digital channels.
  • Regular updates: Customers receive regular alerts related to transactions and their demat account information.

Why use a demat account to invest in mutual funds

It is possible to invest in mutual funds even without a demat account. However, mutual fund investments made using your demat account information has certain benefits.

Incur fewer charges when investing in multiple funds

If you are a stock or share market investor, then you should already have a demat account. But if you just want to invest in mutual funds, a demat account carries a big advantage. You don’t have to open a fresh account (and incur additional charges) each time you invest in a new mutual fund. Since you can make investments in multiple mutual funds through a single demat account, you need to pay maintenance charges for that account alone.

A single place to view all your investments

Over the past decade, Indians have started looking beyond just a Provident Fund investment and life insurance. They now have a variety of investments. More people are investing in mutual funds and there is growing interest in the stock market as well. For instance, an individual today may be investing in mutual funds, exchange-traded funds, government securities, and more. When you have a demat account, monitoring all these diverse investments is easy. Moreover, you receive regular statements for all your investments.

Convenient platforms and facilities

Nowadays, you can open a three-in-one account with a depository participant (DP) like Kotak Securities. This combines a savings bank account, a demat account, and a trading account, all under a single umbrella. Besides, once you have the demat account information in place, you are not restricted to just mutual funds. You can also explore alternatives such as bonds, debentures, and corporate fixed deposits.

Demat transactions are secure and speedy.Plus, you can view updated lists of top-rated and high-performing mutual funds on your DP’s website, as well as monitor how your investments are performing.

Summing up

As digitisation spreads, people are moving towards integrated platforms that are cost-effective and convenient. A demat account is a case in point. Once you have the demat account information in place, you can not only make mutual fund investments with ease but also explore the stock market and invest directly in equities.

Need help? No problem! Most of the bigger DPs provide access to a wide range of educational resources to help you find your financial footing. They may even offer recommendations and research that highlight the top mutual fund picks.So rather than be wary of the demat account, embrace the opportunities it offers. Mutual fund investment is just a few clicks away.

By Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to [email protected].