Introduction
It has been reported by AMFI- Association of Mutual Funds in India that the mutual fund sector has experienced growth of a high scale, from ₹10.06 trillion on July 31, 2014, to ₹64.97 trillion by July 31, 2024. During this growth, investors can now control their units of a mutual fund by availing themselves of a dematerialized account, or a Statement of Account, SoA.
In this article, we explain the difference between Demat account and SoA for mutual funds, by which you can decide the best one according to your needs.
Understanding Demat Accounts
A demat (dematerialized) account is an electronic storage solution for financial securities such as shares and bonds. This type of account eliminates the need for physical certificates, making trading and transferring securities much more convenient. A demat account securely holds your shares and other securities in a digital format, just as a bank account holds your money. In a demat account, you can buy or sell units based on quantity rather than monetary value. But because of the state of the market, the value of these units can change every day.
For instance, if you possess ten units valued at ₹10,000 today, their worth might rise to ₹12,000 or drop to ₹8,000 the following day based on market changes. Thus, staying updated on market trends is essential for effective trading.
Read More: What is a Demat Account?
What is a Statement of Account (SOA)?
A statement of account is a mutual fund company document containing details of all the transactions the investor has undertaken and holdings. Usually provided periodically through paper or electronic means, summarizing all activities in a certain period, it contains record purchases, redemptions, dividends received, and the valuation at which the current investment is currently held.
Now, managing your mutual fund investments with SoA is very much like running a bank account. You may provide precisely the rupee amount you would like to withdraw at the time of redemption of the mutual fund units.
For example, if you wish to withdraw an amount of ₹10,000 and each unit happens to be of ₹100, then you would redeem 100. This method of reclamation clearly mentions the amount one is going to receive at the time of redemption.
Comparing Demat Accounts and Statements of Account
Below is a table that highlights the differences between Demat Accounts and Statements of Account for managing mutual fund investments:
S.No.
|
Parameters |
Demat Account |
Statement of Account (SoA) |
1 |
Format |
Digital format, akin to electronic share holdings |
Conventional paper-based document |
2 |
Issuance |
Administered by depositories (CDSL or NSDL) |
Provided periodically, either quarterly or annually by AMC |
3 |
Fees and Charges |
May include account opening, maintenance, and transaction fees |
Generally free to maintain, with no maintenance costs |
4 |
Asset Holding |
Capable of holding various assets, including shares, bonds, ETFs, and mutual funds |
Limited to mutual fund units |
5 |
Content |
All holdings consolidated electronically in one location |
Contains investor's name, folio number, transaction history, unit holdings, NAV, and total valuation |
6 |
Accessibility |
24/7 online access to statements and transaction history |
Sent to the registered address or downloadable from AMC's website |
7 |
Transactions |
Enables easy online buying, selling, and switching of mutual fund units |
Requires manual processing of transactions |
8 |
Redemption |
Units can only be bought or sold in whole numbers |
Units can be redeemed by specifying the desired rupee amount |
9 |
Suitability |
Best for active investors seeking seamless online transactions |
Ideal for those who prefer physical documentation or do not trade frequently |
10 |
Ease of Transfer |
Single nomination covers all assets, simplifying transfers |
Individual handling of nominations and transfers for each AMC |
11 |
Loan Facility |
Loans against mutual fund units can only be used to purchase securities |
Loans can be secured against mutual fund units for any purpose |
12 |
Security |
High security with low risk of physical loss or theft, but requires protection of digital credentials |
Physical statements are prone to loss, while electronic statements offer enhanced security |
Conclusion: SOA vs. Demat Accounts
After comparing the demat accounts mutually with the SoAs, it's clear that both are unique in their own ways. More flexibility and convenience are attained while withdrawing the fund amount in SoAs than the cost component. On the other hand, there are Demat Accounts wherein investments go real-time tracking with a very convenient transfer process.
Your choice between the two options should best reflect your priorities: which will be more important to you-investing with a low-cost provider, enjoying the ability to time the market, or getting real-time information and enabling transfers into your account? Take time to evaluate what fits best with your financial goals and investment preferences before finalizing your choice.
Financial Calculators: SIP Calculator | SWP Calculator | Compound Interest Calculator | EMI Calculator | FD Calculator | Retirement Calculator | Option Value Calculator | Inflation Calculator | Lumpsum Calculator
Popular Stocks: ICICI Bank Share Price | HDFC Bank Share Price | CDSL Share Price | UPL Share Price | TCS Share Price | BHEL Share Price | Trident Share Price | IRFC Share Price | Adani Power Share Price