With the rising popularity of mutual funds, investors must know all about a Dematerialized or a Demat account—what it is, its associated charges, and other vital facts, including its benefits.
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About a Demat Account and its Type
A Demat account is an electronic account for holding and managing financial securities (stocks, bonds, mutual funds, government securities, etc.) in digital or electronic format, and has two types:
- Regular Demat Accounts that hold all your investments
- Mutual Funds Demat Accounts for mutual fund units only
Based on your investment strategy and choices, choose the kind of Demat account that suits your needs best and open it with bonafide Depository Participants (DP) such as brokerage firms or banks.
Associated charges
There are various charges associated with a Demat account—account opening fees, maintenance, transaction, and custodian charges. These may not be standard and depend on your DP’s company policies.
You must also know all the conversion and other charges associated with converting physical mutual fund units to demat. These may vary from DP to DP. Learn about converting mutual funds here
Ensure SIP Facility
Not all DPs will have the systematic Investment Plan (SIP) facility, but you need to ensure it is available with yours, as it can majorly impact your investment strategies in the long run if you make weekly or monthly investments over a lump sum annual amount.
User Interface
The user interface has an important role in your investment journey. Ensure you get easily acquainted with your DP’s website or app features. Most investors prefer mobile apps to websites and call centres, as it reduces dependencies on access to a desktop/laptop or being on the IVR for transactions. Furthermore, decision-making can be quick and satisfactory if you’re a seasoned investor. However, you must not ignore websites and customer care facilities for backup, as mobile apps can have planned and unplanned downtimes.
Have Research Tools
Having research tools with your DP helps make informed decisions regarding mutual funds since mutual fund investment is an art very few can master.
It is always a good idea to compare services from various DPs before finalizing one for your short-term or long-term mutual fund journey.
