Is a demat account required to invest in SIPs?


As a mutual fund investor, you have the opportunity to invest in different types of mutual funds for different goals – be it for retirement, children’s higher education, long vacations, or to build a corpus. This can be done with a lump sum or Systematic Investment Plans (SIPs). While SIPs offer you the additional benefit of regular and small investments, you may be curious to know whether it is necessary to open a demat account to begin investing through SIPs.

The answer is no – investing in SIPs does not necessarily require a demat account. Although having one can give you many advantages and make the investing process much easier – there are other ways to invest in mutual funds through the SIP mode as well. With that being said, take a detailed look at some ways of investing in an SIP without having to open up a demat account.

Options you can choose when investing in SIP mutual funds

You can invest in SIP mutual funds directly with the Asset Management Company (AMC) or through an online provider. The primary benefit of investing through an AMC is that you can get personalised portfolio advice, along with assistance on KYC formalities and other documents. On the other hand, an online provider might offer greater convenience as they provide additional investment opportunities and 24*7 customer service. Here’s a detailed comparison of both options.

  • Through an asset management company

Simply download the application form or obtain it offline. After that, you have to go to the branch office of the AMC with supporting documents such as PAN and other KYC documents, along with a cheque to make the investment. After submitting these documents and getting them approved, the company grants you a PIN and folio number that can be used for tracking your investments.

While investing in SIPs through AMC may seem relatively straightforward, it can be quite time-consuming if you want to invest in different mutual funds of several AMCs. It involves an additional step of repeating the same process with each new mutual fund investment.

  • Through independent online portals

There are several online portals through which you can invest in SIP plans. Independent online portals are websites that allow you to compare and purchase financial products from various providers. In the case of mutual funds, this means that you can compare different schemes from different AMCs and select the one that best meets your needs.

Simply register yourself first on the website (the process is quite similar to that of the AMC website). You will have to provide your personal details, contact details, and KYC documents. Once your registration is complete, you will be given a user ID and password that you can use to log in to your account. Now select the SIP plan and enter the details, including amount, frequency, tenure, etc. Complete the payment through NEFT/RTGS or net banking mode.

The advantage of using an independent online portal is that you can use a single account to manage and track your mutual fund schemes. At the same time, it is important to choose a reputable provider only since you will be making regular payments through your bank account and want to ensure everything is safe and secure.

Final words

The decision to use a demat account to invest in SIPs is a personal one. A demat account has its advantages and can be convenient, but if you do not opt for it, there are other equally effective alternatives that you can consider.

Whatever route you decide, it is always wise to do extensive research and consult a financial expert to make sure that the fund you are selecting fits your specific financial goals and strategies, and meets your risk appetite.

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