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How to start investing in mutual funds without a Demat account?

Written by - Akshatha Sajumon

January 12, 2022 5 minutes

Mutual Funds are considered as one of the lucrative investment options as it continues to attract more investors every day. These professionally managed funds can help investors inculcate a habit of regular and disciplined savings by allowing the SIP or systematic investment plan option. These also carry the potential of giving higher returns in the long run. An investor can start investing in a monthly SIP with as little as Rs. 500. Mutual funds allow sufficient diversity to an investor’s portfolio since they invest across a wide range of assets, thereby reducing the risk of concentration.

However, many investors often assume that investing in mutual funds is difficult since it is essential to have a demat account. However, a demat account is not the only way one can invest in mutual funds.

There are multiple ways in which one can invest in mutual funds without requiring a demat account. Read on to find out.

  1. Mutual fund house (Asset Management Company)

Investors can invest in a mutual fund directly through the asset management company’s website or app-based platform. Some fund houses may require a physical visit to the fund house, which may be followed by submission of an application form along with requisite KYC documents and cheque for initial investment. AMCs may then allot a PIN for investors to carry out further transactions. Investors are also given a folio number. The drawback that investors have to face in this mode is repetitive application processes with each fund house. Investing through an AMC may limit the investor from enjoying diversification.

  1. Third-party online platforms

Investors can use third-party online platforms for investing in mutual funds without having a Demat account. Fisdom app allows an easy investment process, especially for new investors. For accessing the app, investors can download it on their smartphones and register to begin investing. The app requires basic KYC updation and has a seamless interface for investors to easily buy or sell funds online. It has a wide range of mutual fund options across various investment time horizons, asset classes, and risk-return features.

  1. Registered mutual fund agents

The Association of Mutual Funds in India has many registered mutual fund agents (AMFI) who can assist investors through the mutual fund investment process. The agent database can be accessed on the AMFI website. Investors can also request home visits from these agents to further assist in selecting and investing in the best mutual funds. These advisors are equipped to provide investors with information on the latest schemes or choice of schemes based on market movements.

Some registered agents also undertake handling of the paperwork on an investors behalf. Investors can select an agent based on their qualification, experience, and expertise.

  1. Banks

A popular mode of investing in mutual funds is through banks. Banks can also act as mutual fund agents and these can be ideal middlemen when an investor is sure about the specific mutual fund he/she wants to invest in. An investor can approach his/her bank and inquire about mutual fund investment options available, along with the services offered. 

Top reasons to invest in mutual funds

Listed here are some of the top reasons why investors should consider mutual fund investment:

  1. Professionally managed investments

Active mutual funds are professionally managed by seasoned managers who carry the necessary expertise and experience in handling large-scale investment pool. These managers select assets for investment as per the fund’s objective and ensure maximum returns by constant portfolio monitoring.

  1. Low cost

SIP or systematic investment plan allows investors to begin mutual fund investment with small sums of money. This makes the investment low cost for investors who prefer small sized and distributed investment.

  1. Goal based investment

Investors can select from a range of mutual fund options depending on specific goals. Mutual funds can also be selected based on investment time horizon and risk factor. 

  1. Portfolio diversification

Mutual fund investment provides sufficient portfolio diversification as investors can choose funds based on their risk return expectations. Investors can combine bank deposits and mutual funds within their portfolio to benefit from fixed earnings and market-linked earnings.


Investors who are keen on mutual fund investments need not worry about following complex investment processes, especially with reference to demat account. A Demat account is not essential for investing in mutual funds as there are various avenues available for investors to easily begin their mutual fund investment journey.


  1. Is it safe to invest in mutual funds without a demat account?
    An investor does not need to have a demat account for investing in mutual funds, hence it is safe to invest in them without one. Investors can invest through online portals or apps, directly through AMCs, or registered agents.
  1. Is demat account free?
    Demat account opening could be free if offered by banks or broking firms but is generally charged. 
  1. How do beginners invest in mutual funds?
    Beginners can invest in mutual funds by downloading the Fisdom app on their smartphones. This app allows easy access to various mutual fund categories. Beginners can explore these as per their risk and return expectations.
  1. Which mutual fund is best for beginners?
    For new investors, it is best to opt for low risk mutual funds like debt or fixed income funds. These can provide stable returns and investors do not need substantial market knowledge to invest in them.
  1. Which is better: sip or mutual funds?
    SIP or systematic investment plan allows investors to periodically invest small sums in mutual funds. This mode is ideal for investors who want to begin with small investments and adopt a financial discipline.

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