Demat by default: Are platforms making fund investing hard?

Investing Through Groww or Zerodha? You May Be Missing Key Mutual Fund Features

Groww has joined Zerodha, Upstox and Paytm Money in making demat the default option for new mutual fund purchases, replacing the traditional SoA (Statement of Account) format.

As more platforms push mutual fund investors toward demat mode by default, regardless of whether they are SIP or lumpsum investments, it’s worth asking: Should you hold your mutual funds in a demat?

The two ways to invest in mutual funds

1. Statement of Account (SoA)

This is the traditional route where units are held directly with the AMC (fund house). You get an account statement from CAMS or KFintech, and can transact through the AMC or any online MF platform.

2. Demat

Here, your mutual fund units are held in your demat account, just like stocks. You can buy/sell through your broker.

Pros and cons of SoA and demat

Our take

At Value Research, we’ve long maintained that the SoA (Statement of Account) mode works best for most investors. It’s simpler, more flexible, and more cost-effective. You’re not locked into a single broker, and switching platforms or redeeming funds is hassle-free. There are no hidden transaction charges, and making updates like changing nominees or bank details is usually just a quick online form.

But perhaps the most underrated advantage of SoA mode is that it allows you to use features like SWP (Systematic Withdrawal Plan) and STP (Systematic Transfer Plan) — both of which are not available in demat mode.

• SWP lets you withdraw a fixed amount regularly (like a monthly income) from your mutual fund — a popular option for retirees or those seeking steady cash flow.
• STP helps you automatically transfer money from one fund to another (say, from a debt fund to an equity fund) in a disciplined way — useful for reducing risk while entering markets gradually.

These tools are vital for smart financial planning, especially when managing goals, cash flows, or market volatility.

With SoA, you retain this flexibility — with demat, you lose it.

That said, demat mode is useful if you want all your investments (stocks, ETFs, mutual funds) in one place, or if you already use your broker extensively. But it comes with extra costs, potential delays and can complicate things if you ever want to switch platforms.

Also read: SIP investor? Your fund returns may be misleading you

This article was originally published on July 02, 2025.