First, let us understand what mutual funds are. These are investment programs where investors like you and me let a fund manager or a company take investment decisions on our behalf and invest the amount we specify into stocks, government bonds and other securities. You can invest a lumpsum amount in mutual funds or start a weekly or monthly investment program called Systematic Investment Plan (SIP).
Direct mutual funds can be time-consuming
Now let us understand why keeping mutual fund units in dematerialized mode, or demat, is beneficial. Demat accounts are mandatory for holding stocks and underlying. You do not necessarily need a Demat account for holding mutual fund units since you can directly approach different fund houses for investments. This approach is called investing in Direct Mutual Funds, where you do not need a broker or an agent to take care of all the formalities. While you do save on cost in this scenario, you also invite a lot of tracking, follow-ups and other daily chores that are time-consuming.
Why convert mutual fund into demat
Converting your mutual fund units into demat has a number of benefits, such as:
- Tracking most of your investments at once without worrying about remembering or keeping track of innumerable details for different funds and securities
- No need to maintain physical certificates for every mutual fund investment
- Buy and sell units easily
- Switch units to other funds or within the same fund house in other categories in case of fund non-performance in just a few clicks.
- Eliminates the need for paperwork or running around in case of redemption of units in times of need
However, please be advised that holding mutual funds in a demat invites small fees for account maintenance and transaction charges.
Please note: Mutual funds investments are subject to market risks. Please read all related documents carefully before making investment decisions.
