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Mutual Fund Investments Are Soaring – But How Should You Hold Them?
With mutual fund investments in India hitting a massive ₹68.08 trillion in assets under management (as of November 2024, per AMFI), more and more investors are diving into this wealth-building avenue. But while the “what” of investing is often discussed, the “how” matters just as much—especially when it comes to holding your investments.
Most investors hold mutual fund units in either:
- A Demat Account, or
- A Statement of Account (SOA) issued by the fund house.
Not sure which one is better for you? In this blog, we decode the key differences, pros, and cons between a Demat Account and a Statement of Account—helping you choose wisely based on your goals and investment style.
What is a Statement of Account (SOA)?
An SOA is like your mutual fund bank passbook. It’s a detailed summary issued by the Asset Management Company (AMC) or its registrar (like CAMS or KFintech), showing your unit holdings, NAV, folio number, and transaction history.
Think of it as a document-only record, shared via email or post, and perfect for long-term investors who want a simple and low-cost way to track mutual funds.
Highlights:
- Shows exact rupee-based withdrawals (e.g., withdraw ₹10,000 worth of units)
- Easy to manage and free of cost
- Suitable for NRIs not investing through PIS routes
What is a Demat Account?
A Demat (Dematerialized) Account stores your investments electronically. Managed by central depositories like CDSL or NSDL, it allows you to hold not just mutual funds but also shares, bonds, and ETFs in one place.
This format is ideal for tech-savvy and active investors who prefer consolidated portfolios and real-time tracking.
Highlights:
- Buy or sell units in quantities, not rupee values (e.g., sell 50 units)
- Real-time access via apps or broker platforms
- Charges include account opening, annual fees, and transaction costs
Demat Account vs SOA: Side-by-Side Comparison
| Feature | Demat Account | Statement of Account (SOA) |
|---|---|---|
| Issued By | Depository (CDSL/NSDL) | AMC or its Registrar (CAMS, KFintech) |
| Format | Digital, paperless | Digital or physical copy |
| Charges | Includes account fees, AMC, and transaction charges | Usually free with no annual costs |
| Assets Held | Mutual funds, stocks, bonds, ETFs, etc. | Only mutual fund units |
| Access & Portability | Anytime access through apps or platforms | Sent via post/email or downloadable |
| Transaction Mode | Fully online | May require manual processing |
| Redemption | Sell units in numbers | Redeem by specifying a rupee amount |
| Loan Eligibility | Loans used only for buying more securities | Loans can be used for any purpose |
| Nomination Process | One-time for entire account | Separate nomination for each AMC |
| Ideal For | Frequent traders or multi-asset holders | Long-term investors or NRIs |
Which One Should You Choose?
Choosing between a Demat Account and a Statement of Account boils down to your investment habits:
Choose a Demat Account if you:
- Are an active investor with multiple securities
- Prefer real-time digital access and consolidated reporting
- Don’t mind paying account fees for added convenience
Go with an SOA if you:
- Are a passive or long-term mutual fund investor
- Want a cost-free option to hold units
- Are an NRI investing outside of the PIS framework
FAQs: Clearing Common Doubts
Q1. Do I need both a Demat and SOA?
No. If you hold units through a demat account, SOAs are generally not required, though you might still receive them for reference.
Q2. Are there any costs with SOA?
No, SOAs are typically provided free of charge by AMCs or RTAs.
Q3. Can I switch from SOA to Demat?
Yes, you can convert your SOA-based holdings to Demat by submitting a conversion form through your depository participant.
Q4. Can NRIs open a Demat Account in India?
Yes, NRIs can open demat accounts under PIS rules and invest in Indian markets, including mutual funds.
Q5. What documents are needed for tax filing?
SOA and Demat statements alone may not be sufficient. Keep additional documents like CAS (Consolidated Account Statement), capital gain statements, and dividend slips ready for tax filing.
Whether you’re just starting out or managing a sizable portfolio, understanding how you hold your mutual fund units is as important as choosing the right fund. While Demat accounts offer modern convenience and centralized control, SOAs provide a straightforward, low-cost alternative for hands-off investors.
Tip: Consider starting with an SOA for simplicity. As your portfolio grows, you can always shift to a Demat account for better portfolio consolidation.