How to invest in mutual funds with or without demat account?

Short Answer

Investors looking to invest in mutual funds without a Demat account can invest through financial institutions, independent financial advisors, AMC, and online portals.

Detailed Answer

Recently, a reader of ours asked a query on how to invest in mutual funds so we thought to bring up a write up on that. So, how to invest in mutual funds with or without Demat Account. We will also explore on how to invest in mutual funds through various channels.

Investment into mutual funds have grown tremendously over the years and mode of delivery has also improved. Earlier where only large financial institutions and Financial advisers dominated the market but now there are many options to choose from. And, first-time investors get really confused on whom to approach to buy investment plans.

How to invest in mutual funds Without Demat Account

The First Thing

Those who are first time investor in a mutual fund need to possess certain documents which are compulsory. These include PAN Card, a Bank Account (should belong to the investor), a cheque book and should be KYC (know your customer) compliant. These are the basic documents one needs to have if they are investing in a mutual fund. Those investing through online should have a proper digital payment mode.

For the first time investors, it is normal to not be a KYC compliant. To be a KYC compliant individual, he/she needs to submit the KYC application form with following documents to the financial advisor or fill e-KYC (if doing online) to get registered.

  • A recent passport photo
  • Proof of identity (Aadhar, Voter ID & Passport or documents notified by govt.)
  • Proof of address (Aadhar, Electricity Bill or documents notified by govt.)

Those who have completed the process earlier can check the status through this website.

Different Channels for investing in a Mutual Fund

Through Financial Institutions

There are wide range of financial institutions that offer mutual fund service. These include Banks, stock brokers and distribution companies. These institutions are required to have registration with AMFI (Association of mutual fund of India) to be eligible to offer the services.

Independent Financial Advisor (IFAs)

IFAs offers personalised investment service to the investors. This ranges from investment consultation to managing the portfolio. IFAs act as an agent for the Asset Management Companies(AMC) and sell it to the customers. AMC pays IFAs commission on the sale of every mutual fund schemes. These commissions are included in the mutual fund expense ratio.

Directly from Asset Management Companies (AMC)

An investor can directly approach the asset management companies (through office or online) to make an investment in the schemes. Investing directly through AMC gives you the benefit to invest in direct plans which is not available with the Financial Institution and Independent Financial Advisors.

Also read How to invest in direct mutual funds

Through Online Portals

Nowadays, Mutual fund services are also offered through third party online portals. These online portals can be hosted by private players or govt. backed institutions. These portals have to be mandatorily registered with AMFI, in order to provide the services. Following are the list of important online portals through which you can invest in mutual funds.

MFUtility

CAMS and KARVY portal

Recently, many mobile wallet companies including Freecharge and Paytm, have started to offer financial services in their platform including mutual fund and insurance, but it is better to wait for the platform to mature enough.

Investing in mutual funds With Demat Account

An investor can also make investment in mutual fund through their Demat Account. For this, the investor needs to place an order with the broker he/she is maintaining account with. The investor needs to provide all the details of scheme he/she interested with and the amount will get deducted from the bank account linked with the Demat Account.

All the unit purchased gets credited into the Demat Account. It helps the investor to track the investment portfolio easily without the fear of loss of units.

Investors investing through other channels other than Demat account can also transfer their mutual fund units to the Demat Account. The simple steps involved in to transfer the units are:

  • Obtain a CRF form from your Depository Participant (DP)
  • Submit the CRF form with details along with Statement of Account with the DP
  • After verification of the form, your DP will send it to AMC/ Registrar for further process

After the verification of details by AMC/ Registrar, the transfer of all units will be executed by the DP and will get credited in your account

Conclusion

As we have discussed various options to invest in the mutual fund in details, it is better to know which platform is suitable for which type of investors. Those investors who are investing for the first time in the mutual fund and those who have limited knowledge on the subject should opt for consultancy based options like Independent financial advisors, Financial institutions and online portal like bodhik who can help in making the investment plan more effectively. The seasoned investor can opt to invest directly through AMC, MFutility. The segregation is only for the knowledge purpose and investor can choose any platform according to their need.

Tagged With: mutual fundsinvest in mutual fundsdemat accountinvesting
Categories: Mutual Funds
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Discussion (1)

    Online demat and trading account is a pre-requisite for availing different services from reputed stock brokers. The process of investing has become much simpler owing to the online platforms. For investment in mutual fund demat account is not required. Minimum you require PAN Card, Bank Account on your name and Address proof. Things have become much easier as compared to earlier years. Less paperwork and online uploading of documents saves a lot of customer's time. We can also access our online demat and trading account easily. All you need is a computer and a good working internet. I mean, we can invest, trade and also view our portfolio online. It's just that easy!

Related FAQs

Is a Demat account required for mutual funds?

No, a Demat account is not required for investing in mutual funds in India. However, having a demat account can be beneficial for some investors.

What is Mutual funds Consolidated Account Statement?

Consolidated Account Statement or CAS is a single account statement which consists of all the financial holdings and transactions in an investor’s portfolios.

Can NRIs invest in mutual funds in India?

Yes, any NRI can invest in mutual funds in India, if they follow some certain conditions under Foreign Exchange Management Act or FEMA Act 1999.

Are market highs good to invest in Equity mutual funds?

Understanding the relative position of the market, the absolute values do not matter much. What matters is what is the earnings multiple, currently the market is trading at, popularly captured by a metric called P/E ( Price to earnings).

Should you take a Loan to Invest in Mutual Funds?

Borrowing money for investing in mutual funds never really pays off. Its not the right thing to do given that mutual funds returns would not provide sufficient returns in the time which your loans have to be paid back.

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Yes, Groww app is completely safe for mutual fund, stock investing and trading. As a popular mutual fund investment plaftorm, Groww established itself quite well in the past few years. Now, it has also enetered the stock broking space so it's really good to see new entrants amid existing top discount brokers in India.

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SIP stands for Systematic Investment Plan. You can invest a fixed amount of your choice and set a specific date for investing your money monthly, bi-monthly or fortnightly.

Can a student open a demat account?

Yes, a student can open a Demat account. In case of minor student, the student's account is operated by a guardian and if the student is 18 or above, he/she can manage the account independently. Overall, there is no age requirement.

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