The availability of demat accounts makes investing in mutual funds more accessible and convenient than ever before. A demat account is a digital wallet that holds all your securities in an electronic format. It eliminates the need for physical shares and provides a centralized platform for buying, selling, and monitoring mutual fund investments. In this article, we will help you understand the basics of demat accounts and guide you through the process of selecting and opening the best demat account for mutual fund investing.
Understanding Demat Accounts: What You Need to Know
Investing in mutual funds was previously paper-based and involved a lot of paperwork, including physical share certificates, transfer deeds, etc. The advent of demat accounts revolutionized this system, allowing investors to monitor, trade, and store mutual fund units in digital format. Here are some crucial things you need to know about demat accounts.
Benefits of Demat Accounts
One of the main advantages of using a demat account is convenience. With a demat account, you can easily buy or sell mutual funds with just a few clicks from anywhere, as long as you have an internet connection. You don’t need to fill out any physical forms or visit a broker’s office to make transactions. Other benefits of demat accounts include:
- Secure transactions: Demat accounts provide a secure platform for transactions eliminating the risks associated with physical transfers and storage of securities.
- Storage of a wide range of securities: Apart from mutual fund units, demat accounts can store other securities such as stocks, bonds, ETFs, etc.
- Cost-saving: Demat accounts are relatively cheaper compared to physical transactions in the long run. You save on transaction fees, postage costs, and other charges associated with physical transactions.
Types of Demat Accounts
There are two types of demat accounts available in India: Basic Service Demat Account (BSDA) and Regular Demat Account. BSDA is a low-cost alternative for small investors with holdings below Rs. 2 lakhs. A Regular Demat Account is suitable for investors with higher investment values. When Open Mutual Fund Account, consider your investment goals, frequency of transactions, and investment value.