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How to Invest in Mutual Funds Without Demat Account​?

6 min read•Updated on 19th Jun, 2026•by Angel One
Mutual funds can be invested without a demat account through SIPs or lump sum methods using folio-based holdings managed by fund houses and registrars.
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Many investors assume that mutual fund investing requires a demat account because shares and exchange-traded securities follow a dematerialised holding system. In reality, most mutual fund schemes can be purchased and managed directly through folios maintained by fund houses and registrars.  

Understanding how to invest in mutual funds without a demat account helps investors start SIPs or lump sum investments through regulated channels without opening a separate trading or demat account. 

Key Takeaways 

  • A demat account is not compulsory for most mutual fund investments in India. 

  • Investors can use SIP or lump sum methods through regulated non-demat channels. 

  • Mutual fund units are commonly held in folio form with fund houses and registrars. 

  • Demat accounts are mainly useful for investors managing shares, ETFs, and multiple market-linked assets together. 

Understanding Demat Account

A demat account stores securities such as shares, bonds, and ETFs in electronic form through authorised depositories. However, mutual funds without demat accounts are also permitted because units can be held directly with fund houses in folio format. Investors can buy, redeem, and track most mutual fund schemes without opening a demat account. 

Ways to Invest in Mutual Funds 

Investors who ask, can I invest in a mutual fund without a demat account, should know that several regulated investment methods are available without opening a demat account. 

  • SIPs allow fixed monthly investments directly through bank mandates. 

  • Lump sum investments help invest a one-time amount in selected schemes. 

  • Direct plans can be purchased from fund house platforms after KYC verification. 

  • Online and offline applications allow investments through authorised channels and folio-based holdings. 

These methods support mutual fund investing through regular banking and KYC processes without requiring a separate demat facility. For example: An investor can start a ₹5,000 monthly SIP in an equity mutual fund directly through an AMC website by completing e-KYC, setting up a UPI AutoPay mandate, and receiving units in folio form without opening a demat account. 

Steps to Start Investing in Mutual Funds Without a Demat Account

Investing in mutual funds without a demat account is a straightforward process. Mutual fund units can be held in Statement of Account (SoA) form, where your holdings are maintained directly by the fund house and its registrar. To begin, ensure you complete the basic requirements and then follow the investment process. 

  1. Complete the basic requirements 

Before investing, keep the following ready: 

  • A valid PAN card 

  • Completed KYC verification. KYC can be completed online through Aadhaar-based e-KYC or offline through KYC Registration Agencies (KRAs), as per SEBI guidelines. 

  • An active savings bank account 

  • Registered mobile number and email ID for OTPs, transaction alerts, and account updates 

You should also ensure that your mutual fund folio includes a nominee or a formal opt-out declaration, as mandated by SEBI. As per SEBI regulations, investors must either register a nominee or explicitly opt out by submitting a declaration. 

  1. Invest directly through an AMC 

You can invest directly through the website or mobile app of your preferred Asset Management Company (AMC). 

  • Register using your PAN and contact details 

  • Select the type of mutual fund, such as equity, debt, or hybrid 

  • Choose the specific scheme and investment option 

  • Enter the investment amount and payment details 

  • Complete the transaction using net banking, UPI (including UPI AutoPay for SIPs), or other SEBI-approved payment mechanisms. 

Once the transaction is processed, units are allotted and recorded in your folio in SoA form. 

  1. Set up SIP investments 

If you prefer regular investing, you can create an SIP through the same platform. 

  • Choose the SIP amount and investment frequency 

  • Select the start date 

  • Authorise an e-mandate or bank mandate for automatic payments 

Future installments are deducted automatically, and the corresponding units are added to your folio. You can modify, pause, or stop an SIP whenever required. 

  1. Use investment platforms and registrars 

Apart from investing directly through AMCs, investors can also use registrar platforms and SEBI-registered intermediaries to access multiple mutual fund schemes from a single account. These platforms allow you to invest, redeem, switch schemes, and manage requests while keeping holdings in SoA form. 

There is no requirement to open or link a demat account at any stage of this process. 

Advantages of Having a Demat Account to Invest in Mutual Funds 

Some investors continue to choose demat-based mutual fund holdings, raising the recurring question: Do I need a demat account for mutual funds if I already invest in shares and ETFs? The main benefits are related to convenience and managing investments in one place: 

  • Centralised portfolio view: A demat account enables investors to see equities, ETFs, certain debt instruments, and eligible mutual fund schemes all from a single login. This helps investors track their overall investment allocation more easily. 

  • Simplified tracking and record-keeping: Investors get consolidated statements from depositories that contain both demat-held mutual funds and other investments, minimising fragmentation. For individuals who already have a demat account for trading, adding mutual funds may eliminate the need to use several interfaces. 

  • Operational convenience for multi-asset investors: Investors who regularly trade multiple securities prefer the convenience of placing orders using a familiar platform and viewing holdings all in one spot. For such individuals, the question of whether I need a demat account for mutual funds becomes more about workflow integration than a regulatory requirement.   

However, certain features such as systematic transactions (SIPs, SWPs, STPs) may have limited flexibility or require platform-specific support when mutual funds are held in demat form. 

Alternatives of Having a Demat Account for Mutual Funds 

There are multiple alternatives available that are fully compliant and widely adopted, including the following:  

  1. Direct plans via AMCs: Investors can choose direct plans on AMC channels. This benefits them with lower expense ratios compared with regular plans because distributor commissions are excluded. This route is suitable for investors who are comfortable with selecting schemes independently, without the need for a demat interface. 

  1. Regular plans through distributors: Bank-led and independent distributors offer regular plans. Here, commission is embedded in the expense ratio, and investors receive guidance and service support. Units are still held as folios in the registrar system, and no demat account is required for purchases or redemptions. 

  1. Registrar and industry platforms: Registrars provide digital access for investors to view and transact across schemes serviced by them, using PAN-based folios. MF Central, a SEBI-supported initiative by CAMS and KFin Technologies, enables investors to view, service, and manage mutual fund investments across multiple AMCs in a single platform without requiring a demat account. 

  1. Intermediary-led MF interfaces: SEBI-registered intermediaries, including some brokers and investment platforms, allow investors to place mutual fund orders that settle directly into folios maintained by registrars and AMCs. This method allows investors to use app or web-based platforms while continuing to hold mutual fund units in folio form. 

Also Read: Mutual Funds vs Equities   

Drawbacks of Not Using a Demat Account  

While folio-based, non-dematerialised investment is widely used and cost-effective, it has several disadvantages as compared to demat-centric consolidation. This can lead to the following drawbacks:  

  1. Multiple statements and folios: Investing across several AMCs may lead to multiple folios. This can include multiple AMCs or registrars sending their own statements, potentially cluttering your email and complicating record-keeping. Although consolidated statements and industry utilities can reduce some of this complexity, investors may still feel that demat-based reporting is more tightly integrated. 

  1. Fragmented tracking: Without a single demat platform, investors may need to use multiple portals to track their investments. This may be manageable for smaller portfolios but less convenient for investors holding many schemes. 

  1. Less alignment with stock investing workflows: Investors who already operate heavily through demat and trading accounts might find using separate mutual fund channels less convenient. For such investors, demat-based holdings may feel more convenient for managing all investments together. 

  1. Consolidated Account Statement (CAS): Investors in folio mode still receive a Consolidated Account Statement (CAS) from depositories (NSDL/CDSL) on a monthly basis if transactions occur, or half-yearly otherwise, which provides a combined view of mutual fund and demat holdings linked to PAN. 

Also Read: Difference Between NSDL and CDSL   

Conclusion

Mutual fund investments can be started without opening a demat account because most schemes are available through folio-based holdings. Investors who ask, can i invest in mutual fund without a demat account, should know that SIPs and lump sum investments can be made through regulated channels after completing KYC and linking a bank account. A demat account mainly becomes relevant for exchange-traded products and investors managing multiple market-linked securities together. 

Looking to invest? Open a Demat Account with Angel One and start trading seamlessly.  

FAQs

You can purchase mutual funds by investing through AMC channels, registrars, or SEBI-registered intermediaries after completing KYC and attaching a bank account. Mutual funds do not mandate a demat account since units are registered in folios (SoAs) managed by registrars and AMCs. 

Yes, SIPs can be set up and managed in non-demat mode, with bank account debits and folio credits. SIPs in regular mutual fund schemes do not require a demat framework; only exchange-traded products must. 

You can invest directly by selecting direct plans provided by AMCs and completing KYC and paying through permitted methods. Direct plans offer lower expense ratios than regular plans since they do not include distributor commissions. 

A bank account is mandatory since all investments, SIP debits, redemptions, and payments are processed through banking channels. Mutual fund transactions cannot be executed unless the investor has a bank account in their name. 

Stock investment requires a demat and trading account with exchange-based settlement. Mutual funds can be purchased directly from AMCs or registrars using folios, with no demat involvement. 

There are no demat or maintenance fees for folio-based investment. Expense ratios and exit loads are standard mutual fund fees that apply in all circumstances. 

Investors frequently use fintech apps, AMC websites, registrar platforms like MF Central, and SEBI-registered intermediaries for folio-based investing. The decision is based on cost preference, support requirements, and simplicity of portfolio tracking. 

Most open-ended mutual funds, including equity, debt, hybrid, and ELSS schemes, can be purchased and held in folio form without opening a demat account. 
 

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