Sameer is new to mutual funds investment, but what he’s read around through different articles in media and online, that this is the best tool to create wealth in long term. This attracted him towards this product and he wanted to start with a SIP as a first step. His friends suggested him a convenient way to get this done by getting a demat account opened which is being offered by the bank where they have salary accounts with. This as per them is the easy, less troublesome, paperless way to invest and manage mutual funds holdings. Moreover this will also help in buying other financial instruments and one can have single view account of all the financial products.
Being an electronics engineer and a tech-savvy guy employed with an IT firm, this looks fine to Sameer too. But he wanted a second opinion on this. He met one of the planners at mutually convenient time and floated specific questions to him.
1.) Is having demat account mandatory to invest in Mutual funds? Or is it wise to open a demat account for mutual funds purchases?
2.) What are the other “convenient” ways of investing in mutual funds and which are cost effective too?
3.) How having demat account helps in better financial management from financial planning perspective?
4.) Does he (financial planner) advice his clients to open demat account and if yes, in which companies?
The first answer started with a big NO. It’s not mandatory to have demat to invest in mutual funds. However whether it’s wise to open demat account, totally depends on investors’ requirement and understanding of the product.
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