Mutual funds are among the most popular investment choices. With digitisation of investments, many investors wonder whether they should hold their mutual fund units in demat form. At first glance, it looks modern and convenient—but before you decide, it’s important to weigh both sides.

What Does It Mean to Hold Mutual Funds in Demat Form?

• Normally, when you invest through AMC websites, MF Central, MFU, CAMS, or KFintech, your mutual fund units are held in non-demat format (SOA – Statement of Account).
• If you invest via stock brokers like Zerodha, Upstox, Groww, or ICICI Direct, your mutual fund units get credited to your demat account, just like stocks.
• Essentially, instead of RTAs maintaining your folios, all holdings sit in your demat account.

Now, let’s break down the pros and cons.

Advantages of Holding in Demat Form

• Single Platform Convenience: Manage all your investments—stocks, ETFs, bonds, and mutual funds—through one account. Perfect for active stock market investors.
• Easy Monitoring: All investments appear in one place, often with portfolio analysis tools (valuation, gains/losses, allocation).
• Faster Transactions: Redemption and purchase can be as quick as selling a stock. Your bank and KYC details are already linked.
• No Multiple Folios: Instead of scattered folios across AMCs, everything reflects under one demat account.
• Simplified Transfer on Death: Transmission of holdings to a nominee is faster through the Depository Participant compared to approaching multiple AMCs or RTAs.

Disadvantages of Holding in Demat Form

• Transaction & Maintenance Charges: DPs may levy charges per transaction and annual maintenance fees. Direct AMC investments usually don’t have these costs.
• Loss of Direct Access to AMCs: You cannot transact directly with AMCs or RTAs. All activity must pass through your broker/DP. This adds an extra layer to the process and reduces your direct control.
• Limited SIP Flexibility: SIPs are less customizable—treated more like monthly lump sum orders. Pausing or modifying requires starting afresh.
• Restricted Features & Schemes: Options like STP, SWP, or trigger-based plans may not be available. Some fund houses/schemes may also be missing from broker platforms.
• Risk of Regular Plans: Some brokers don’t offer direct plans. Without realizing, you might end up in regular plans with higher expense ratios.

So, Should You Choose Demat Format?

• Yes, if: You are an active stock market investor who values having everything on one platform. You prefer convenience over costs.
• No, if: You are a long-term SIP investor focused on cost-effectiveness and flexibility. You want direct AMC access, full SIP control, and zero extra charges.Article published in Capital World – Rajkot on 22nd September 2025Article published in Capital World – Rajkot on 22nd September 2025