DEMAT FACILITY FOR INVESTMENT IN MUTUAL FUND

Demat account facility is available for investing in mutual funds but there are questions in the minds of investors as to when these should be used. The demat option to investing might complicate the matter further for investors as it would bring in a new route for investing that might work demat option can be used for holding mutual fund units.

If there is already a demat account that is being held and used for the purpose of buying stocks then the costs for the maintenance are difficult. This is the reason why attention should be paid to the issue of the conditions under which already being incurred. In such a situation the investor just has to look at the extent of the transaction costs that would be incurred and then make the decision. Thus if there is a demat account already present then it would ensure that a part of the costs would not be additional and hence it would be prudent to use this.

The investor having investment in stocks as well as units benefits the investor to be able to buy and sell the units from the single account with much less efforts. The investor should be able to buy the units and get them credited to their demat account because if the investor does not have access to this it is tougher to operate. Another benefit is that units can be freely transferred to the accounts of nominees or legal heirs, except in case of tax-saving funds, which have a three-year lock-in. However, transactions through brokers involve approximately demat fee of Rs 300-500 on annual basis and a brokerage every time you transact. The brokerage could be more than 0.05 per cent per transaction.

Knowledge of the manner in which the investor would be able to transact and buy and sell the units is important for them to complete the investment process. But if there is a need for consolidation of the holdings for easy management then the demat route is the way to go.