A Demat account also called as a dematerialised account, is an online account where you can save your investments in a digital form. It helps you to keep a record of different types of investments like mutual funds, bonds, stocks, etc in a single place. It is a very useful account but if you ask is Demat account required for mutual funds? Then, the answer will be no.

If you want to invest in mutual funds, you can do it without having a demat account. The decision to hold mutual fund units in Demat mode is absolutely optional, except in respect of Exchange Traded Funds. For all the other schemes, including the close-ended listed schemes like Fixed Maturity Plans (FMPs), it is entirely up to the investor whether to hold the units in a Demat mode or in a conventional physical accountant statement mode. This online account is mandatory only when you are investing in stocks.

Are there any advantages of having a demat account?

Is demat account required for mutual funds? No. But are there any advantages to it? Yes. Check the below-mentioned points to know the advantages of a Demat account.

1. Digital library – All your investments are stored in one place digitally. You don’t have to look for securities and bonds at different places. You can easily overlook and manage your money and make other investments.
2. Safe and secured – Before the arrival of the Demat account, the shares were present on the paper certificate. But now, all the shares, documents or certificates are digitally saved. You don’t have to worry about the theft, forgery or misplacement of the documents as they are safe and secured electronically.
3. Smooth transfer – Having a Demat account will help you with a hassle-free transaction. You can easily buy or sell your shares and transfer the ownership to another person without the management of physical papers. This saves process saves you time and money.
4. Easy accessibility – You can easily access the account on your computer or smartphone anytime. You just need an internet connection and a smartphone. There is no need of searching the physical papers of the investments.
5. Auto-credited dividend – Early you did have to wait for a long time to receive the interest, dividend or refunds. But now because of the Demat account, the money is automatically credited to your account. Through the electronic clearing service (ECS), updating your account with stocks, bonuses, rights, splits, etc has also become easy and fast.
6. Nominee – In case of an investor’s demise, the person who is appointed as the nominee will get the shares. The ownership of shares is quickly transferred to the nominee through the Demat account.
7. Share liquidity – The selling of shares has become fast and convenient because of the Demat account. The money is transferred quickly, upon selling your shares.
8. Loan on securities – If you have a Demat account, then you can take a loan against your shares. You can keep your securities as collateral and later pay off the loan to redeem the shares.

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What are the different ways to invest in mutual funds?

You already know the answer to the – is demat account required for mutual funds? But then another question arises – are there any other ways to invest in mutual funds? To clear this doubt, you need to read the following pointers.

1. Asset management company – You can directly buy mutual funds from the asset management company’s website. You need to visit the branch of the company to submit the application along with your KYC documents, PAN card and cheque. After the approval of the application, a PIN and folio number will be given to you through which you can manage your investments.

But this option limits your investment diversification as you can only buy the mutual funds of that company from their website. You have to repeat this process to buy mutual funds from other companies' websites.

2. Individual online portals – Many online portals offer the investment of mutual funds. For this, the registration process is similar to that of an asset management company (AMC). You just don’t need to visit any branch and can simply submit the application online with other documents and manage your account. Using this single account, you can handle all your mutual fund investments.

If you choose this option, then you need to check the authenticity of the website and beware of the fraud portals as there are plenty of scammers. Check if the portal is approved by your bank for online transactions.

3. Mutual fund advisors – There are many mutual fund advisors registered with the Association of Mutual Funds in India (AMFI) who can help you in finding the best investment scheme. They even visit your house and introduce you to the best investment or scheme that will suit you maximum. You can easily get the list of advisors on the AMFI website.

But searching for the best advisor is the first step. You need to check their qualification, experience and knowledge as many advisors are just registered with AMFI and are not active.

4. Registrar and transfer agents – Transfer agents are the mediator between you and the company. Finding an appropriate mutual fund advisor or asset management company can be a little difficult for a newcomer. So, you can contact a transfer agent who will present you with various investment schemes and help you in submitting the application to different companies. They keep a record of all the mutual fund statements that you can ask them for at any time. You don’t have to pay them as they get their commission from the company itself.
5. Banks – You can invest in mutual funds directly through your bank. Visit the branch and ask if they are selling the mutual fund you want to invest in. If yes, then submit the application along with the bank draft or cheque.

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But be cautious of mis-sellers who might suggest you other investment schemes for their profit. Only buy the mutual funds that you have researched.

Now, you know all the ways through which you can buy, sell and manage your securities and investments. You know what a Demat account is and what are its advantages. So, now ask yourself – Is Demat account required for mutual funds? And choose the best option for your investment plans.

Gold Mutual Funds vs Gold ETF

Gold's allure for the Indian people will never fade. Gold's symbolic worth has only grown over the last several decades, and any astute investor understands that it also serves as a fantastic hedge against inflation and equities investments. Gold investments are not novel means of asset diversification. The method that gold is invested in, however, has evolved. Physical gold storage has become more inconvenient for investors due to the expenses associated with keeping it safe and the danger of theft. Gold Exchange Traded Funds (ETFs) and Gold Mutual Funds have grown in popularity alongside digital gold.

The modern gold investor has several options for getting exposure to gold investment procedures, including exchange-traded funds (ETFs), mutual funds, and even purchasing bullion from a local jeweller.

To compare Gold Mutual Funds vs Gold ETF, it is necessary to first comprehend the essence of each of these financial vehicles.

Read: Is Demat Account Required for Mutual Funds?

What is an ETF for gold?

It carries hazards to keeping gold in its physical form at home. Holding gold in the form of an ETF (exchange-traded fund) is far more practical than owning real gold. Unlike real gold prices, which fluctuate throughout India based on region and the demand-supply dynamic, gold ETFs are passively managed and accurately represent the current gold prices. In addition, gold ETFs are less expensive than purchasing or disposing of actual gold.

A fund manager's only responsibility in these plans is to purchase gold bullion and deposit it with the scheme's custodian. Gold ETFs are listed on the stock market. These ETFs provide the same return as genuine gold and mirror the price of gold. The cost ratio and tracking inaccuracy of the strategy are the primary factors that differentiate the returns between ETFs and actual gold. Better refunds for clients result from a smaller tracking error.

For those who consider gold as an investment rather than something to utilise for jewellery or personal usage, investing in gold ETFs is a great option.

What is a mutual fund for gold?

A select few brokerage firms enable clients to buy gold ETF units on a recurring basis. The amount of units that may be acquired at the time of each transaction must be specified by the investors in these arrangements. The majority of investors find this to be quite inconvenient. Additionally, holders of gold ETFs must have Demat accounts.

Fund firms began marketing gold mutual funds as a solution to this issue. Mutual funds for the acquisition of gold invest in plans to buy gold ETFs. The value of gold ETF units, which in turn reflect the value of real gold, is tracked by gold mutual funds. The performance of the underlying asset determines how much money these mutual funds earn. Returns on gold mutual funds are impacted by changes in the NAV of gold ETFs units.

Gold Mutual Funds vs Gold ETF | Major Difference

Method Of Investment And Amount

While you could invest in a Gold fund via SIP in multiples beginning as little as Rs 500, which would provide you units of the gold fund based on the day's NAV, while investing in ETFs you must purchase units of ETFs, with a minimum purchase of 1 unit. One unit of gold

exchange-traded funds corresponds to one gramme of gold. Therefore, one unit of a gold ETF corresponds to one gramme of gold. Due to this, ETFs have a greater minimum investment requirement than Gold mutual funds.

Mode Of Holding

Since Gold ETFs are exchanged on the stock market in the same way as stocks, only a broker and a Demat account may be used for buying and selling. When you purchase or sell ETFs, the funds are deducted from or credited to your Demat account. Investing in a Gold Fund, on the other hand, has no such prerequisite.

Without a Demat account, you may invest in a gold mutual fund through a SIP or a lump payment. The transaction occurs at the Net Asset Value (NAV) of the day in question.

Expenses Involved

Key expenses for gold ETFs include Demat fees, the expense ratio, and brokerage fees, bringing the yearly cost to between 0.5 and 1 percent. The annual expense ratio for gold mutual funds is between 0.6% and 1.2%, which includes the gold ETF expenses listed above plus 0.1% to 0.2% for managing the gold. On redemption within a year, there are no exit costs applicable to Gold ETFs, while gold funds may impose an exit penalty ranging from 1% to 2%. It comes down to which type of investing you find more convenient, given that the difference in fees between the two is not substantial.

Liquidity

ETFs in India are generally illiquid due to the fact that they are traded on stock exchanges, which necessitates an optimal number of interested purchasers when you choose to sell your shares. Given the tiny size of the ETF market in India, gold ETFs are less liquid than gold mutual funds, which may be acquired and sold with reasonable ease.

Gold Mutual Funds vs Gold ETF: Conclusion

Despite the fact that gold funds and ETFs are both legitimate investment alternatives, choosing between the two may be a matter of personal preference. If you prefer to make systematic long-term investments, you might choose gold funds. You may use gold ETFs if you want a Demat account and there is a potential that you will need to convert the gold into physical gold. The decision is yours!

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