Do We Need Demat Account For Mutual Funds

Do We Need Demat Account For Mutual Funds

Mutual funds have become a very popular form of investing. Investors can select a mutual fund plan from a variety of markets based on their investment objectives and risk tolerance. However, a frequent query that investors have is whether they require a Demat account in order to invest in mutual funds. The requirement regarding a Demat account for mutual fund investments in India will be covered in this article. You will get the answer to the question that states, “Is Demat account required for mutual funds or not?”

Is Demat Account Required For Mutual Funds?

A simple no is the response. In order to make investments in mutual funds in India, investors do not require a Demat account. Demat accounts are not necessary because units of mutual funds aren't traded on stock exchanges. Mutual fund units can be purchased by investors through the Asset Management Company (AMC) or via a licenced distributor of mutual funds.

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Table of Content

  1. Is Demat Account Required For Mutual Funds?
  2. Ways to Invest In Mutual Funds
  3. Other Options You Can Choose to Invest In Mutual Funds
  4. Advantages Of Demat Account For Mutual Funds

Ways to Invest In Mutual Funds

  • Systematic Investment Plan (SIP): A systematic investment plan (SIP) provides a mechanism for making disciplined, regular investments in mutual funds. A SIP allows investors to make fixed-amount investments overtime at certain times, such as every month or every quarter. This approach aids investors in long-term corpus building and cost averaging out of investments.
  • Systematic Withdrawal Plan (SWP): A Systematic Withdrawal Plan (SWP) is a technique for regularly and methodically taking money out of mutual fund investments. An SWP allows investors to make set withdrawals over time at predetermined intervals, such as monthly or quarterly. With the use of this technique, investors can make an ongoing income from their mutual fund holdings.

Other Options You Can Choose to Invest In Mutual Funds

  • Broker: Brokers give customers Demat accounts so they may trade on the stock exchange. A Demat account is advised for investors who want to make many investment channels, including stocks, bonds, mutual funds, etc. since it enables you to keep an eye on all of your assets in one place. Demat accounts come with yearly maintenance and transaction fees, which differ from broker to broker.
  • Asset Management Company: AMCs provide alternatives for investing in mutual funds on their respective websites. Investing is as easy as going to the AMC website and choosing the funds you want to put money into. After that, you have to go to the AMC's actual location and submit your application together with your PAN card, KYC paperwork and a cheque. Once the firm has approved your application and given you your PIN and folio number, you will be able to manage your assets. It may seem easy to invest in mutual funds offered by several AMCs, but each time you make a new investment, you will have to go through the procedure again.
  • Offline And Online Distributors: You can invest in mutual funds through several online and offline distributors. You will receive your investment acknowledgement in a physical format from offline distributors. Unlike this, online distributors provide a complete virtual investing experience. For easy and efficient use, they curate all your investment activities in one place.
  • Net Banking: Through their online banking services, many private banks allow their account holders to invest in mutual funds. Your net banking will show any bank financing you've done.

Advantages Of Demat Account For Mutual Funds

Here are the seven advantages of opening a demat account for Mutual Funds:

  1. Convenience: Managing several securities, such as bonds, stocks, and mutual funds, in a single account is made possible for investors by storing units of mutual funds in a Demat account. From a single platform, investors can easily monitor and manage their investments.
  2. Security: Being in possession of mutual fund units in an electronic wallet reduces the possibility of physical certificates being lost, stolen, or damaged. Dematerialised assets are held electronically, lowering the possibility of theft or loss.
  3. Ease of transaction: Demat account for mutual funds makes buying and selling units simpler, simply because electronic transactions may be made without the use of paper documents.
  4. Lower costs: Since there are no fees associated with holding physical certificates, such as the printing process, delivery, or storage, maintaining mutual fund units within a Demat account may prove cost-effective. In addition, compared to actual certificates, transaction brokerage fees may be lower.
  5. Faster settlement: Because securities are transferred electronically rather than physically, controlling mutual fund units in a Demat account helps hasten the settlement of transactions.
  6. Trading Records: A Demat account for mutual funds allows investors to see a consolidated view of all of their holdings, such as stocks, bonds, and mutual funds, which makes it simpler to keep track of and manage their portfolio.
  7. Adding a nominee: Nomination is made simple because investors can choose their beneficiaries online without the requirement for paper documents when they hold units of mutual funds in a Demat account.


Even though it is not necessary to have a Demat account to invest in mutual funds in India, doing so does have its benefits. The question for the article” Is Demat account required for mutual funds?” is totally dependable upon your choice, but note the benefits include convenience, security, simplicity of transaction, lower expenses, quicker settlement, an overall overview of investments, and ease of nomination you get from the Demat account.

Nevertheless, investors also have the option of making a direct investment via the company that manages the assets or doing so through a licensed mutual fund distributor. Now, you can unlock the potential of the stock market with the blinkX trading app, empowering you to trade, hedge, and speculate with confidence, all in one seamless platform.

Do we need demat account for mutual funds FAQS

No, a Demat account is not required in order to purchase mutual fund investments through a stock broker or distributor. Without a Demat account, investors may get mutual fund units from a broker or distributor.

No, without a Demat account, traditional mutual fund certificates are unable to be changed to electronic form. However, as mentioned in the article, investors are not required to have a Demat account in order to invest in mutual funds directly through the Asset Management Company (AMC) or by using a registered mutual fund distributor.

Yes, using the online investment platforms offered by Asset Management Companies (AMCs) or registered mutual fund distributors, investors can invest in mutual funds online without a Demat account. These services enable users to make investments in mutual funds without a Demat account by using their bank accounts.

Yes, investors may own units of mutual funds in both physical form and a Demat account at the same time. However, since the investor would have to keep a record of two different types of holdings, this could result in extra costs and inconveniences.

Yes, Demat account providers may charge an account maintenance fee and transaction charges for mutual fund transactions done through the Demat account. However, it is advisable to check with the Demat account provider for specific fee details.

Yes, many mutual funds offer the option of converting physical mutual fund units into electronic form.

The choice of investing with or without a Demat account depends on the investor's preference and investment needs. Investing directly with the fund house may have certain advantages like no Demat account-related charges, but using a Demat account can offer convenience for those who prefer a consolidated view of their holdings.

Yes, mutual funds purchased through a Demat account can be held for the long term, just like mutual funds held in physical or online form. 

No, if you already hold mutual funds in physical or online form, there is no requirement to open a Demat account.