Is Demat Account Required for Mutual Funds or Not?
Wondering if a Demat account is needed for mutual funds? Uncover the facts, pros & cons, and start investing smart today. Read our 2025 guide now!
When you decide to invest in mutual funds, a common question arises: is Demat account required for mutual funds? The short answer is no, but choosing between a Demat account and the traditional non-Demat (physical) mode depends on your investment preferences.
one of the first choices you’ll need to make is how to hold your investments — should you go for a demat account or choose the traditional non-demat (also known as physical) form?
Each method has its own advantages and drawbacks. In this article, we’ll explain the differences in simple terms to help you choose the right option based on your needs, goals, and convenience.
What Are the Two Ways to Hold Mutual Funds?
1. Non-Demat or Physical Form
This is the most common method used by individual investors. When you invest through a mutual fund house (AMC), a registrar like CAMS or KFintech keeps a record of your investment. You get a Statement of Account (SOA) that shows your holdings
Benefits:
- No need to open a demat account.
- You can invest and redeem through AMC websites, RTAs, MF Central, or distributors.
- Consolidated account statements are sent regularly.
- Supports Systematic Investment Plans (SIP), Systematic Withdrawal Plans (SWP), and Systematic Transfer Plans (STP).
2. Demat Account
Here, your mutual fund units are stored electronically in your demat account just like stocks. You can invest, track, and manage all your securities in one place using your broker’s platform.
Benefits:
- One-stop solution for stocks, ETFs, and mutual funds.
- Easy tracking via a single platform.
- Units can be transferred as gifts to another demat holder.
Key Differences: Non-Demat vs. Demat
What You Should Consider
Regular Income Post-Retirement
Planning to withdraw monthly through an SWP? Non-demat is ideal. It allows you to set a fixed withdrawal amount every month — perfect for retirement cash flow. Demat accounts don’t offer this flexibility.
Handling Market Volatility with STP
Want to gradually shift money from debt to equity or vice versa during market ups and downs? STPs work only in non-demat mode. This is a smart strategy that isn’t available in a demat account.
Ease of Redemption
- Non-Demat: Redeem via AMC websites, RTAs like CAMS/KFintech, MF Central, or distributors.
- Demat: Redemption is possible only through your broker’s platform.
Cost Efficiency
There are no maintenance or transaction fees in the physical form. Demat accounts may charge annual maintenance or transaction fees.
Flexibility and Transfers
Demat allows you to transfer units to someone else as a gift. Non-demat does not — you must redeem first.
Which One Should You Choose?
Choose Non-Demat (Physical Form) if:
- You prefer no extra charges.
- You want full access to SIP, STP, and SWP features.
- You want multiple redemption options.
- You are focused on goal-based planning and retirement income.
Choose Demat if:
- You want to manage all investments in one place (stocks, ETFs, mutual funds).
- You plan to transfer units as gifts.
- You already have an active demat account and prefer centralized tracking.
How WealthBeats Finserv Helps You Decide
At WealthBeats Finserv, we guide you based on your financial goals and lifestyle needs:
- Personalized Investment Guidance: We help you choose the best method (demat or non-demat) aligned with your goals.
- Retirement Planning: We ensure stable post-retirement income with customized SWP strategies.
- Market Volatility Support: We use STPs and dynamic allocation strategies to manage risks.
- Redemption & Transaction Assistance: We simplify your transactions through the most convenient platforms.
- Smart Portfolio Structuring: We build balanced portfolios based on your risk tolerance and future needs.
Final Verdict
If your focus is on low cost, flexibility, and long-term financial planning, non-demat (physical form) is the better choice.
But if you want to manage everything — stocks, ETFs, mutual funds — under one roof and are okay with some limitations, a demat account could work for you.
Whichever path you take, WealthBeats Finserv is here to walk with you, guiding your investments towards your dreams.
No, you don’t need a demat account to invest in mutual funds. You can invest through the physical form using AMCs, RTAs like CAMS/KFintech, or MF Central.
For most investors, the physical form (non-demat) is better because it supports SIPs, SWPs, STPs, and offers more flexibility.
Yes, if you hold them in the physical form, you can redeem directly through AMCs, RTAs, or MF Central.
No, there are typically no maintenance or transaction charges in the physical form.
Yes, you can switch by submitting a transfer or conversion request through your AMC or RTA, but there might be some paperwork involved.
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Vineet Baheti,CFP
With over 14 years of experience in wealth management, I am expertise in comprehensive financial planning, including tax planning, retirement planning, and goal-based planning for High-Net-Worth (HNI) and Ultra-High-Net-Worth (UHNI) clients. As a Certified Financial Planner (CFP, Certification Number: IN94288), I provide personalized strategies to help clients achieve financial security, optimize their tax positions, and plan for a prosperous retirement. My approach is centered around building tailored financial plans that align with individual’s unique goals, ensuring their long-term financial success.