Investing in Mutual Funds through a demat account? Know the problems you may face
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While investing in MF schemes may be done with just some clicks through a demat account, the investors may face difficulties in case of doing transactions through any other modes.
Piali Chatterjee (name changed) started investing through the SIP (Systematic Investment Plan) mode in a Mutual Fund (MF) scheme of one of the biggest Asset Management Companies (AMCs) through a demat account provided by one of the largest MF distributors.
Recently, she logged in her demat account to stop the SIP. Though the options of redemption, Systematic Withdrawal Plan (SWP), Systematic Transfer Plan (STP) etc were available in the demat account, there was no option available to stop the SIP.
Unable to stop the SIP through the demat account, she tried to login to the site of the AMC to stop it. However, she was unable to do so.
In the meantime, she got a call from the AMC and the person tried to assist her over phone to locate her folio and exercise the option to stop the SIP.
As guided by the AMC person over phone, Piali tried to find the folio, but with no result. She then informed the AMC person that the SIP was started through a demat account and in reply, she was informed that SIPs started through demat accounts can’t be stopped or redeemed through any other way, but through the demat account only.
Anil Chandra (name changed) also had a similar experience, when he visited the office of another leading AMC to get a statement of his MF investment made through his demat account. The AMC employee at the reception informed him that – forget any transaction – even a statement can’t be fetched offline for investments made through demat accounts.
So, while investing in MF schemes may be done with just some clicks through a demat account, the investors may face difficulties in case of doing transactions through any other modes, in case the demat account is not readily accessible, or options of some transactions are not available on the demat account the investor is using, or in case the demat service provider or the depository participant (DP) stopped the services.
“If an investor has MF units in a demat account then the investor can’t get a physical statement from AMC or registrar. He/she has to get a transaction statement from his DP,” says Ajay Sharma, Director, InvestmentMitra.
Sharma also lists the following problems that demat account holders may face:
- To sell his/her MF investments held in demat form the investor has to submit delivery slips with his/her DP which is usually a problem.
- For all investments bought and sold in physical form, one can get capital gains statements from the registrar. Whereas in case of units held in demat form the investor has to maintain records by himself/herself.
- For buying and selling mutual fund units in demat form, one has to pay brokerage to the broker and transaction charges to DP in addition to annual maintenance charges to DP.
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