Mutual funds: Mutual funds can be held in a demat account. You can also keep them in a Statement of Account (SOA) form. In both the cases, the holding is in digital mode and there is no physical certificate. Here are some factors that you should keep in mind before deciding on your holding mode.
Have you invested in ETFs?
Do you want to invest in ETFs, then you should use a Demat Account to hold mutual funds. You can similarly access ETFs through the fund of funds route and keep them in SOA format.
The biggest advantage of a demat account is that you can keep your financial investments like shares, mutual funds, bonds and sovereign gold bonds in a single account. This makes it easy to keep an eye on. If you hold in SOA form, it is largely resolved by the Consolidated Account Statement issued by CDSL or NSDL.
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Transactions
The biggest advantage of holding in SOA format is that you can transact through multiple channels. You can request redemption for units of a mutual fund scheme on the website or from the office of the mutual fund company or registrar and transfer agent. You can also transact through the distribution platform or transaction platforms like MF Utility (MFU).
If you have holding units in your demat account, you can make this request by login to your broking account.
This means the investment in the demat account has to face certain limits whenever you do a redemption transaction. Generally, investors can sign up for a systematic investment plan (SIP) and hold units in a demat account. But if the units are in the demat account, then Systematic Transfer Plan and Systematic Withdrawal Plan are not allowed.
transfer
Transmission: In case of mutual fund units held in SOA form, each folio is treated as a separate investment and may have a separate nominee. In the event of the death of a single investor, the nominee (or legal heir) can approach each fund house and submit the transfer request along with the required documents.
Rajat Dutta, founder and initiator of Inheritance Needs Services says, “Sometimes the name of the beneficiary is mentioned in the will, which may be different from the nominee. In case of a nominee of MF Investments, it will transfer to the first nominee with the responsibility of giving it to the beneficiary as per the will.” However, if the MF investment is in physical form and if the nominee dies and a beneficiary is mentioned in the will, the mutual fund will have to complete the process of transfer on the basis of an obituary, which is mandatory, he added.
In the event of the death of one of the joint holders of the MF folio held in the SOA form, the control of the investment will remain with the surviving joint holders.
In the event of the death of the investor when the mutual fund is held in the demat account, the nominee in the demat account will get control of all investments. In the event of the death of one of the joint holders, the surviving joint holders will get control of all investments.
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