Mutual funds in demats be damned


When investing in mutual funds, you have two options: receiving your units in a Statement of Account (SoA) or your demat account, both of which are digital, eliminating the need for paper certificates.


The SoA option offers a more traditional way to hold mutual fund units. In this case, you deal with the asset management company (AMC) directly. The AMC issues a statement indicating your fund holdings when units are allotted.


On the other hand, in demat form, a Depository Participant (DP) like Central Depository Services and National Securities Depository holds the mutual fund units. Demat units can be bought and sold through brokers, or your DP.


Which mode is better: Demat or SoA?


Earlier, demat accounts allowed you to view all your investments in one place. However, having a consolidated view of your investments is now also possible through the CAS (Consolidated Account Statement), and one need not necessarily have a demat for the same.


The table below highlights the differences between mutual funds held in a demat account vs SoA:


As it can be seen, for most investors, SoA is the preferred choice, offering a simpler and more straightforward way to hold mutual funds.


What you should do


Switch to the SoA option. They help you save money, are faster and more flexible.


  • If you have a distributor handling your money, call them and ask if you hold funds in a demat account . If that’s the case, get it converted to a Statement of Account (SoA).
  • If they try to sell you demat accounts, change your distributor. (They might be earning a brokerage).
  • Only if you buy ETFs (exchange-traded funds) should you have a demat account. For all the other funds, SoA works best.


How demat account is converted


Step 1: Submit a signed Rematerialisation Request Form (RRF) to your DP (the entity that manages your demat account). You’ll get this form from the DP itself.


Step 2: The DP will verify the form and send it to the RTA, a body that maintains mutual fund records.


Step 3: The RTA will transfer your investments to SoA.


That’s pretty much it. You just need to file the RRF by having your Aadhaar and PAN next to you.


By changing to the rather-convenient Statement of Account (SoA), you’ll earn higher returns and stop paying unnecessary fees for a start.


Source- Valueresearchonline

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