Many new investors are confused about Demat and non- Demat Mutual Funds. They really don’t know the difference between the two. Also they don’t know the pros and cons of the two types of MFs.
Here are few things that I have understood till now.
MFs shall not actually be classified as DEMAT and REMAT as many people think drawing parallels with shares in Physical and Demat format.
Yes there are indeed non-Demat and Demat MFs. But the more correct nomenclature is
a. Statement of Account format & b. Demat format
Earlier when there was no concept of Demat the MFs used to be issued in, held in, transacted in Account of statement of format.
It was only after SEBI - for reason best known to her only - asked AMCs to give investors option to have MF units in Demat format.
Actually, “There is no physical way to hold mutual fund units. Mutual fund units are held by RTAs and the investor gets account statements. The investor does not get a physical unit or any other certificate,” says C R Chandrasekar, CEO, Wealth India, which owns the online distribution platform for retail investors.
So there is virtually no benefit of holding your MFs in DEMAT format. Actually there is a loss of DP charges, per month charges etc.
Whatever the benefits that you think that DEMAT MFs have to offer are already taken care of by AMCs, MF services like CAMS, Karvy and the best of all - MFU.
You have options of accessing your folios through stylish and sleek platforms of respective AMCs.
Even CAMS and Karvy has provided the great apps to manage all your investments in one go.
MFUIndia provides your Broker level services. That to free of cost. Seriously I have not found even a single USP for the platforms like Upstox MF or Coin that MFU doesn’t have.
All AMCs issue a consolidated statements of all your investments combined every month end.
Summary of the story - There are no Physical MFs as such. There are SoA (Statement of Account) mode MFs. SoA mode MFs are just like Demat MFs. Like every other documents and accounts today, they are also held in electronic format by AMCs and are accessible online, on the go.
Firstly we need to segregate platforms based on Direct and Distributor. So FundsIndia, Upstox etc that you have mentioned are distributor platforms. If you know what funds to buy, using a distributor platform is quite foolish. Your investment will return so much more if you invest directly in the long run.
Between MFU and say Coin (by Zerodha/us). Why coin, when MFU is free and we charge Rs 50/month after first 25k of investments?
A much better user experience. We should very soon have the option to invest into SIP from your bank accounts directly. We are going to launch a really cool coin mobile app. I might have a vested interest, but I’d say there is no comparison.
MFU doesn’t have a business model. Such ventures, I guess like you’d know can’t be sustainable and keep pace with all the new things happening in the world.
About why demat to non-demat.
Pledging units to take a loan is seamless and easy.
Transferring units between platforms is extremely simple.
If you have friends who have inherited mutual funds units in non-demat, do speak to them. It is extremely tough. In demat mode, all units go to the nominee without any hassle.
Yes there is Rs 5.5 as DP charge everytime you redeem and Rs 50/month. But, this is like 2018, a tender coconut costs like Rs 35. I mean, if Rs 50/month is so much, then maybe yeah, MFU will be a better idea.
What surprises me is that the mentality of Indian investor. People are ready to spend thousands of rupees for weekend entertainment which is the expense for them but hesitate to spend Rs. 50 + GST every month which keeps their investments safe / secure for them and their family.
Indian mentaility - Will buy fancy / expensive mobile cover to protect the mobile phones from damaging but will not wear helmet / seatbelt while riding / driving.
This is NOT an Indian Mentality. This is a universal mentality.
And what’s wrong with it?
Applying the same logic that every Direct plan promo uses.
saving 50+GST per month for next 35 years will save ₹ 8.8 lakhs!!!
Dear Dear. ₹ 50 don’t keep investment safe. DEMAT keep investment safe. For that we here already pay ₹ 300 PA. But issue is NOT at all of safety. because investments will be more than perfectly safe in SoA format as well.
Even as per @Nithin here. ₹ 50 is for coolness. nothing much else.
And Zerodha already saves so much of our money that not even a single person bothers about ₹ 50. In above topic as well I just touched that point. My focus was SoA vs DEMAT only
Dear @Nithin out of great respect for you, I didn’t want to reply to you initially. I always fill it awkward to corner someone. But as an after thought, continuing discussion here.
Have you used MFU, MyCMAS, MFGo etc - they also provide great user experiences. At least as of now.
MFU already have this option. AND as I have always pointed out - Zerodha needs to improve their update cycle frequency. Today it takes months to implement even very basic functionalities and correct very minor (but troublesome) bugs. I have a experience form other discount broker, where they fixed a bug with a deadline of a week!
And MYCMAS, GoMF etc already have cool apps. But off course we need to wait to see coin app to really compare.
Unfortunately, can I say the same with discount brokerage!!! @Nithin The competition is tough dear. Other brokerages just pounce on any new idea that Zerodha comes up with and blindly replicate that. But they also themselves come up with few novel ideas and those Zerodha never copies. So at the end these brokerages end up with more features than Zerodha!!
See you used the word coolness multiple times here. Wont it be natural for customers to compare “coolness” of various platforms. And in that unfortunately, Kite 3.0 needs to improve like a LOT!!!
It’s not harsh to say that zerodha need to look at their development dept asap.
But there is a BIG caveat here - the inheritor also need to have a DEMAT account. And most probably he/she won’t have any. And for most financially literate people, there will be a transmission rather than transfer.
@nithin
You know what your USP is? don’t you!?
It is just because you are such an active participant here.
Actually I am waiting for a BIG moment for tradingqna community when @nithin will enter in an epic fight with someone here online (remember Twitter these days!)
Anyways nobody expect all projects to be a big successes. Here people are still selling regular MFs and even ICICI Direct is also flourishing (Only God knows how?!)
So Coin will also flourish. Many people want just single password in their life!
Any ways I will be PMing you tomorrow regarding my concerns about Kite and overall development speed. Read it, Ignore it, whatever.
Cheers
