Is demat account required for mutual funds?

Is demat account required for mutual funds?

Both the stock market and our daily lives have been changed by technology. Since the time when dealers screamed stock prices for buying and selling, a lot has changed. All of your dematerialized or electronic shares listed in stock market are kept in a demat account but is demat account required for mutual funds? 

For investing in mutual funds, a Demat account is not required. The KYC processes must be finished as the only requirement. You won't need to submit the papers again for further investments after your KYC for Demat Account has been registered with the AMC or authorised intermediaries.

How do Demat accounts function?

To purchase and sell shares, you obtain a connected trading account with your demat account that has a special login ID and password. Following a purchase, shares are kept in a Demat account.

You must sign in to your trading account that is connected to your bank account in order to buy or sell a certain stock. When 'buy' or sell orders are made in your trading account, your Depository Participant (DP) promptly passes them to the stock market.

In the event that the stock exchange gets a "buy" order, it looks for sellers willing to sell the same number of shares and tells settlement institutions to debit the seller's Demat account and credit the buyer's Demat Account with the specified number of shares. This is how a single stock market deal operates. Demat accounts can be held by both buyers and sellers at various depositories.

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Table of Content

  1. How do Demat accounts function?
  2. Here are some reasons to register a demat account for managing your mutual fund investments: 
  3. How to Buy Mutual Funds Online without Demat Account
  4. Advantages Of Having A Demat Account
  5. Conclusion

Here are some reasons to register a demat account for managing your mutual fund investments: 

Opening a demat account offers investors a wide range of advantages, including the following. 

  • You do not need to keep actual certificates for your investments in mutual funds: Opening a demat account will allow you to quickly buy and sell units of various mutual funds. Units acquired in this manner must be stored in your demat account, and any units you decide to redeem must be transferred straight from your demat account. 
  • No need to use a broker's services to purchase or redeem mutual fund units.A demat account is the finest instrument for mutual fund investment since it allows you to handle a variety of transactions involving your mutual fund assets on your own. There is no requirement for any broker to get involved in the process. 
  • Improvements in transaction security and transparency: Having a demat account is similar to having an electronic safe for your investments. Compared to its offline predecessor, the entire process of placing transactions and monitoring fund values becomes considerably safer and more open. 
  • Easy access to your mutual fund assets is possible thanks to the upkeep of digital certificates of your mutual fund holdings and the digital bookkeeping which is a feature of demat accounts. You may quickly and accurately choose investments by checking the most recent Net Asset Values of various funds. 

How to Buy Mutual Funds Online without Demat Account

There are several methods to invest in mutual funds without needing a Demat account for mutual funds.


Brokers provide Demat accounts so that customers may trade on the stock exchange. A Demat account is advised for investors who seek to engage in a variety of investment vehicles, such as mutual funds, stocks, bonds, etc. This is because it enables you to track all of your assets in one place. Demat accounts include yearly maintenance and transaction fees, which might vary from broker to broker.

Company for Asset Management

AMCs provide alternatives for investing in mutual funds on their respective websites. Going to the AMC website and choosing the funds you want to invest in is all it takes to invest. After that, you must submit your application in person at an AMC branch along with your PAN card, KYC records, and a cancelled cheque. Once the firm has approved your application and given you your PIN and folio number, you are able to manage your assets.

Distributors both offline and online

You may purchase mutual funds from a variety of online and offline sources. Offline distributors would send you a tangible copy of your investment acknowledgment. Online distributors, on the other hand, offer a full-fledged virtual investment experience. They organise all of your investment-related operations into one location for simple and effective usage.

Internet banking

Many private banks give their account users the choice to use their online banking services to invest in mutual funds. The financing you've done through a bank will be seen in your net banking.

Advantages Of Having A Demat Account

The following are some advantages of having a Demat account:

  • When purchasing a fund, an investor wouldn't have to fill out several forms or documentation. In other words, you do not need to produce different documentation for each investment in mutual funds or any other plan.
  • It makes purchasing, trading, and managing money easier.
  • All mutual fund holdings across all fund companies are available on a single statement through Demat.
  • Electronic holdings eliminate the possibility of theft, bogus shares, or any other irregularities that were observed in physical holdings.
  • Removes the address and bank account discrepancy.

Having a Demat for mutual funds does have certain disadvantages, though.

  • There is a maintenance cost for a Demat account. Brokers charge different fees. As a result, you may save money if you wish to invest in mutual funds because Demat is not required


Is demat account required for mutual funds? The simple answer to this question is no. A Demat account is not required in order to invest in mutual funds. You may simply acquire mutual funds via online banking. It is the favoured way to buy mutual funds for many individuals.

Trading in equity shares mostly takes place through demat accounts using a trading app. But you may also invest in mutual funds using a demat account. It is simple to use, and just a little fee is assessed at the time of the transaction. Additionally, it only takes a few clicks to get all of the aggregated reports of your assets.


Is demat account required for mutual funds FAQs

No, opening a demat account is not required to invest in mutual funds. Without a demat account, mutual funds can be purchased and sold directly through Asset Management Companies (AMCs), their authorised representatives, or online platforms.

You can invest in mutual funds without a demat account by using the services of a mutual fund distributor or by directly investing through the mutual fund company's website or mobile app.

Yes, you can hold mutual fund units in a demat account.

Yes, there may be expenses associated with keeping mutual funds in a demat account, including yearly maintenance fees, transaction fees, and custodian fees.

A demat account is not required to invest in mutual funds, although there are certain benefits. The investing procedure is more streamlined and user-friendly, providing increased convenience.