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what is a demat account? why should you invest in mutual funds through demat account?

what is a demat account? why should you invest in mutual funds through demat account?

demat account or dematerialised account holds the securities in a dematerialised form. it is used to hold shares, bonds, mutual funds & government securities.
March 30, 2021
5 min read
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what is a demat account

What is Demat Account

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over the past few years, systematic investment plans (sips) have become the most favourite investment option among investors. with the introduction of demat accounts, investments have become easier, safer and quicker and holding mutual funds through a demat account is even more convenient. this short-read aims to explain to you the meaning of a demat account and the benefits of holding mutual fund investments through a demat account.

demat account

demat is a short form of the word dematerialised, and as the name suggests, the demat account holds the securities in a dematerialised form. it is the most convenient way of holding all your securities electronically. demat accounts can be used to hold shares, bonds, mutual funds, exchange-traded funds, and government securities.

benefits of holding demat account

you can convert your physical shares into the dematerialised form and hold them in the demat account. the 3-in-1 account facility allows you to hold only one account for investing, savings, and trading. therefore, the investment has become easier, comfortable, and the safest. the benefit of holding a demat account is that the chances of physical damage or loss of shares are reduced to nil. securities are held in an electronic form that prevents your securities from theft.

reason why you should invest in mutual funds through demat account

while there are many ways to invest in mutual funds, such as direct investment, investment through a broker / distributor, lump sum investment and sip investment, investing in a mutual fund through a demat account helps you in many ways. 

  1. since the bank links your demat account with the savings account with them, you do not need to undergo the kyc requirements, nor you have to register your bank details with the fund manager.
  2. you do not need to research the top picks as the broker with whom you maintain your demat account provides you with all the results and analysis.
  3. you can invest in many different types of mutual funds, and you will be able to all of them in one place without having to log-in to their sites and check the status.
  4. the security of your investment certificate has increased with the demat account facilities.
  5. opening a demat account has become a matter of seconds these days, and with that, the overall investment experience has become very smooth and less costly.
  6. demat account is updated for every transaction incurred. hence, for every transaction made for the mutual fund, you will have an updated portfolio and your holding's updated statement.

closing thoughts

although direct investment in the mutual fund is cheaper, the number of benefits that come with a demat account is much more, and hence, it is recommended to use a demat account to invest in mutual funds.

use sip calculator or sip return calculator to know the amount of sip needed to invest every month to achieve your financial goals.