Advanced technology has eliminated visiting any broker or asset management company to invest in mutual funds. In the case of buying, selling, or managing mutual fund units. investors have a choice to open a demat account or not. Purchasing a mutual fund using a Demat account reduces your responsibility to some extent for safe mutual fund investing.
What Is a Demat Account?
A demat account is an electronic facility with the stockbrokers to hold the financial securities in the stock market. It can hold your shares, mutual funds, bonds, exchange-traded funds, government securities, etc. It is a mandatory account as per SEBI mandates in India to enter the share market and invest in most of the securities.
- With a demat account holding all securities under one roof, investors are free from the risk of holding securities in the physical format, like damage, theft, etc.
- It has reduced the overall transaction cost.
- Investors need not worry about any malpractices rampant to physical documents in trading and investing.
Opening a Demat Account to Invest in Mutual Funds
When you invest in mutual funds directly from the company, you need to send the documents to the company to request buy. You can avoid any paperwork in buying or redeeming the funds. The transaction amount will be debited/credited to the demat accountholder’s bank account.
Steps to open your demat account online
Step 1: Shortlist the best name names in the stockbroking industry. You can open a demat with a reputed discount broker to save on investing costs. They offer free demat account along with a trading account.
Step 2: Access the demat account opening form at the official website of the stockbroker. It would be best to select a broker following a 100% digital demat account opening process.
Step 3: Enter your personal details like name, age, work profile, etc., and mobile number to start the registration process. The broker will send the OTP to the registered mobile number. Verify the OTP to continue.
Step 4: Upload the requisite documents. The broker will need your PAN card, Identity Proof, Address Proof, passport size photo and Income Proof to set up your demat account. Keep the soft copies of these documents ready for fast processing.
Step 5: Now, you can submit the demat account opening form. The broker will verify the documents. Next, the representative of the broker may connect with you for personal identification via a video call, or you can record a short video and send it to the broker.
The broker will activate your demat account and send you the demat account log-in credentials to start investing in the stock market. You need to pay the demat account maintenance charges to the broker, which differs from broker to broker. However, you can save this cost for the first two years of opening the account with renowned discount brokers.
How to Invest in Mutual Funds Using Demat Accounts
To invest in mutual funds through an online platform, follow these steps:
- Log on to your demat account and open the list of fund schemes.
- Select the mutual fund house and fund scheme as per your investment goals and risk profile.
- Select the mode and amount to invest in a mutual fund scheme – One Time Payment or Monthly Payment via a Systematic Investment Plan (SIP).
- You just need to input the requisite details, like name, email ID, and mobile number, to complete the transaction through the demat account. Your broker has already verified the personal and bank details while opening your demat account online.
How to Redeem Mutual Fund Units
Investors can redeem their mutual fund units held in demat accounts through their stock brokers.
- First, the investor needs to place a sale order to the broker.
- The investor needs to submit a delivery instruction slip (DIS) to deliver the mutual fund units to be sold to the broker in favour of the designated Clearing Corporation.
- The broker will receive the funds from the Clearing Corporation through the usual settlement process and credit the funds to the investor’s bank account.
Thus, whenever you want to start investing with a small amount of funds. You can consider mutual funds investing through your demat account.
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