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:

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.

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