To invest in mutual funds, one no longer has to go to a broker or asset management firm. When purchasing, promoting or controlling mutual fund units. Investors may decide whether or not to create a Demat account. Your responsibility for safe mutual fund investment is somewhat lessened when buying a mutual fund utilizing a Demat account. Read More: Tom Von Reckers
What Is a Demat Account?
A Demat account is an electronic holding place for financial assets with stockbrokers on the stock market. Your shares, mutual funds, bonds, exchange-traded funds, and other types of assets may be stored there. According to SEBI regulations in usa, an account is required in order to invest in the majority of securities and participate in the stock market.
- With a demat account holding all securities under one roof, investors are free from the risk of holding securities in the physical format, like damage, theft, etc.
- It has reduced the overall transaction cost.
- Investors need not worry about any malpractices rampant to physical documents in trading and investing.
Opening a Demat Account to Invest in Mutual Funds
You must provide the necessary documentation to the firm when buying mutual funds directly from them. You may purchase or redeem the money without completing any documentation. The demat account holder’s bank account will be debited or credited with the transaction amount.
Steps to open your demat account online
Step 1: Make a shortlist of the top stockbroking companies. To reduce the cost of investing, you might create a demat account with a reputable discount broker. Along with a trading account, they also provide a free demat account.
Step 2: Visit the stockbroker’s official website to access the demat account opening form. It would be advisable to choose a broker after creating a demat account entirely digitally.
Step 3: To begin the registration process, provide your name, age, employment information, and cellphone number. The OTP will be sent by the broker to the provided cellphone number. Check the OTP to proceed.
Upload the necessary papers in step four. To set up your demat account, the broker will require your PAN card, identity documentation, proof of residency, a passport-size picture, and evidence of your income. Keep the electronic versions of these papers available for quick processing.
Step 5: At this point, you may submit the form to start a demat account. The papers will be checked by the broker. Next, the broker’s representative may use a video call to connect with you in order to verify your identity. Alternatively, you may film a short video and email it to the broker.
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To begin investing in the stock market, the broker will activate your Demat account and email you the Demat account login information. You must pay the broker the Demat account maintenance fees, which vary from broker to broker. However, if you create an account with a reputable discount broker, you may avoid paying this fee for the first two years.
How to Invest in Mutual Funds Using Demat Accounts
To invest in mutual funds through an online platform, follow these steps:
- Log on to your demat account and open the list of fund schemes.
- Select the mutual fund house and fund scheme as per your investment goals and risk profile.
- Select the mode and amount to invest in a mutual fund scheme – One Time Payment or Monthly Payment via a Systematic Investment Plan (SIP).
- You just need to input the requisite details, like name, email ID, and mobile number, to complete the transaction through the demat account. Your broker has already verified the personal and bank details while opening your demat account online.
How to Redeem Mutual Fund Units
- First, the investor needs to place a sale order with the broker.
- The investor needs to submit a delivery instruction slip (DIS) to deliver the mutual fund units to be sold to the broker in favour of the designated Clearing Corporation.
- The broker will receive the funds from the Clearing Corporation through the usual settlement process and credit the funds to the investor’s bank account.
Thus, whenever you want to start investing with a small amount of funds. You can consider mutual funds investing through your demat account.
