Do you need a Demat Account for investing in Mutual Funds?

A Demat Account is an online account that you can use to hold securities in a ‘dematerialised’ or digital form. You can use this account to hold multiple types of securities, such as stocks, bonds, Mutual Funds, etc. Moreover, it is easy to use and offers you a lot of conveniences. However, having a Demat Account to buy Mutual Funds is not mandatory. Read on to know more about this.

Many wonder whether they need a Demat Account to invest in Mutual Funds. A Demat Account is mandatory for investing in stocks but not for mutual funds, though having one can be beneficial for the following reasons.

• The account offers you a common place to hold all of your investments. This makes it simpler to track and manage your money and make better investment decisions to reap good returns. 

• You can get a single statement to view all your Mutual Fund holdings from different schemes in your account.

• Having an online account offers great accessibility. You can carry out fast and seamless transactions as opposed to storing your investments physically.

• A Demat Account offers better security. All your information is safely stored. There is no possibility of a physical loss or damage to important documents, certificates, etc. Moreover, using the account also minimises the chances of falling victim to a theft or a scam.

• You can add a nominee to your account to enable a smooth transfer of units to them in the unfortunate event of your demise.

There are some other ways to invest in Mutual Funds. For instance, you can invest directly with the Asset Management Company (AMC) or through an online provider. But each of these options can have some drawbacks. Here's a comparison that can help you understand this better:

Directly through an asset management company

AMCs offer the option to invest in Mutual Funds on their official websites. Visit the AMC's website and select the funds you want to invest in. You will then be required to visit the AMC's physical branch and submit an application form, a copy of your PAN card, KYC documents, and a cheque. Once your application is approved, the company will provide you with a PIN and folio number that you can use to manage your investments.

The process may not seem too complicated, but if you invest in Mutual Funds of different AMCs, you will have to carry out this process individually every time you invest in a new Mutual Fund.

Through independent online portals

You can also opt for an independent provider to invest in Mutual Funds. For this, register with the portal. The registration process is more or less the same as with an AMC. However, you can use a single account to manage all your Mutual Fund schemes. However, verifying the provider's authenticity before investing any money is important to avoid getting scammed. You should also check if your bank approves the portal for NetBanking.

Through a Demat Account

Opening a Demat Account requires selecting a depository participant (DP). Once you have chosen a DP, you can submit the application form, identity proof such as PAN, and other important KYC documents. The DP will verify your KYC information and accordingly approve your application.

You will then receive an account number and password that you can use to access your Demat Account. You can use this account for all your investments in different Mutual Fund schemes and other securities. So, the overall management will be hassle-free and a lot more efficient.

HDFC Bank Demat Account can be ideal for investing in Mutual Funds. You also use the same account to invest in initial public offerings (IPOs), exchange-traded funds (ETFs), sovereign gold bonds (SGBs), bonds, equity, and non-convertible debentures (NCDs).

Here are some benefits and features of having an HDFC Bank Demat Account :

• Fast, paperless, and seamless process for account opening (takes all of five minutes)
• Ready-to-trade account for immediate investing
• Convenient transfers of your portfolio from any DP to HDFC Bank DP
• Option to take digital loans against securities or Mutual Funds
   

Want to open a Demat Account?  Click here to get started.

*Terms and conditions apply. This is an information communication from HDFC Bank and should not be considered as a suggestion for investment. Investments in the securities market are subject to market risks; read all the related documents carefully before investing.