Purchase of MFs thru Demat?

POSTED BY raju ON February 4, 2011 3:47 pm COMMENTS (11)

Hi all,

I have demat account with Geojit,they offer Mutual funds purchase ans sell thru their demat account in demat format.

I have purchased few MFs thru Geojit?

Is it good to buy Mutual funds thru Ddemat account or to go for any other agent like fundsindia?

Pls advise on the convenience and risk?

 

Regards,

Raju

11 replies on this article “Purchase of MFs thru Demat?”

  1. Vaidyanathan says:

    My DP is ICICI Bank and have a ICICIDIRECT trading account. Want to link some MFs from my DP account to the trading account. AMUs r not giving the SOA so that can submit to ICICIDIRECT for linking. They say since under DEMAT, only DP will give me the SAO from them. How am I supposed to link to trading account without going thru the porocess of REMAT etc etc . Do not understand the logic behind this. Can u throw some light ?

    1. AMC does not give anything is the units are in demat form, its related with the demat provider only !

  2. Dear Jig, online portals like https://www.fundsinda.com or https://www.fundsupermart.com or https://www.moneysights.com are also providing the online MF investing with using Demat route. If the purpose of operation is fulfilled with these online ones, I do not see any merit using our demat accounts.

    Disclosure – I do own a icicidirect demat account & trading account but I’m using https://www.fundsindia.com for my own investments so my views may have a bias.

    Thanks

    Ashal

  3. Jig says:

    Manish or Ashal,
    Can you please throw some light on this issue? What is advisable?
    If i feel convenient to invest through Demat but at the same time Is it advisable to pay something ( i am not sure that i am paying anything extra) to get convenience. Considering very critical investment like Retirement saving plan which may be keep us investing for next 25 yrs..

    Please your urgent help required

    Jig

  4. Jig says:

    Hello Rajesh,
    I have asked and following the reply from the broking house.
    First Reply:
    “for the Mutual Funds there are no charges applicable from our end. However, Exit load will be applicable depending upon the scheme by the Asset Management Company (AMC).”

    Second Reply on the same query:
    “In continuation ,we wish to inform you that, the tax applicable is called as STT i.e. Security transaction tax which is 0.25%. STT is applicable only in case of Mutual Fund redemption of equity linked schemes charge by Asset Management Company (AMC)”

    Can you please eloborate on this reply ?

    What is advisable ? go through Fundsindia or Demat?
    For fundsindia i have to open account and may be other more formalities considering as an NRI investor.

    Regards

  5. Rajesh says:

    Hi Raju

    STT can apply in when
    1. you sell your units on the exchange
    2. the fund manager sells the securities on the exchange

    hence, by using the demat route, you can incur a double incidence of STT. Please get this clarified from the DP.

    Happy informed investing.

  6. raju says:

    Addition to that,
    till now i have not sold any MFs to check on STT on redemption.So,I am not sure abt STT on redemption.

  7. raju says:

    As I was told by DP branch manager,there are transaction charges(STT etc.,) for mutual funds sell/redeem.
    I can see it in my DP account also.But they are in demat format.

  8. Rajesh says:

    Hi Raju,

    A straight answer with this limited information looks difficult.

    If you don’t mind, please bounce the following questions to you DP; let their customer service answer them –

    1. What is the STT implication when you sell your mutual fund units held in your demat account – am I charged twice as an investor?
    2. What is the charge from the DP while redeeming a mutual fund – is it based on the value of the redemption, a flat fee or whichever is higher?

    Once you have answers to this questions, please share it with all of us. It could be an eye opener for all. Until then, you may want to stick to what you are doing at present.

    A decision to change can be taken anytime, but better we are fully informed and then make that decision.

    Hope this helps.

    Happy informed investing.

  9. raju says:

    Thanks Rajesh,

    I opened this account for shares ans mutual funds together, not just for MFs.
    But , Now i am investing 80% in MFs and 20% in Stocks as I am new to the investment in shares directly.
    I may increase my proportion in shares once I am confident enough with the stock analysis and experience in stock investment.

    Pls comment on this.

  10. Rajesh says:

    Hi Raju,

    Unless you feel that you would like to use your demat account to transact in shares, opening one and maintaining it for the sake of mutual fund investments only is actually a waste of money in the current scenario.

    Today, through portals like fundsindia.com and fundsupermart.com you are able to transact in any mutual fund without having to open a demat account.

    Do remember that to open and maintain a demat account, most depositary participants will charge you a fee. Over and above that, even when a security is taken out (i.e. you are selling/redeeming), the depository can charge you a fee. All of this is avoidable.

    Happy informed investing.

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