“Is demat account a pre-requisite of SIP?” is just one of the several questions that can be asked by an individual who wants to invest for the first time.
This question makes new investors confused and it also discourages them from starting their SIP investment venture. Let’s get into more detail in this article to resolve this doubt.
What is an SIP?
SIP or Systematic Investment plan is when investors deposit equal amounts at regular intervals into an investment account such as a mutual fund or retirement account.
Investors are able to save on a regular basis with lesser amounts of money, yet they can still benefit from the long-term merits of rupee-cost averaging (DCA).
The strategy underlying SIP is a straightforward one. It involves making regular and periodic purchases of units in a fund.
Since the amount invested is generally fixed and doesn’t depend on unit or share prices, an investor ends up buying fewer shares when unit prices rise and more shares when prices drop.
This method can be useful in reducing the impact of market volatility on investments.
Is Demat Account Required for SIP?
NO, a Demat account is not a prerequisite for a Systematic Investment Plan (SIP).
A Demat account is an electronic resource that enables you to hold many assets in one place. It is required if you wish to invest in the stock market.
However, due to significant technological advancements, having a Demat account is no longer required to begin your SIP investment journey.
As mentioned above, SIP stands for Systematic Investment Plan, which is an investment mechanism that allows you to invest a defined amount in a Mutual Fund at regular periods.
SIPs can be purchased from an asset management company (AMC), an independent financial adviser, your bank, or other internet portals.
Thus, in short, you don’t require a Demat Trading Account to invest in SIPs. Due to enormous technological advancements, having a Demat Account is no longer necessary to start your SIP investment journey.
You only require a Demat account if you are interested in investing in stocks.
While a Demat account can be useful for certain types of investments, it is not a necessity for investing in SIPs.
How to Invest in SIPs without a Demat Account
Investing in Systematic Investment Plans (SIP) without a Demat account is quite straightforward. Here are a few ways you can invest:
1. Directly through Asset Management Companies (AMCs)
Investing directly through Asset Management Companies (AMCs) involves visiting the AMC’s website and following their investment process.
This method allows you to invest in the mutual funds offered by that particular AMC. However, it restricts your investment options to only the funds managed by that AMC.
This is a simple and direct way to invest in SIPs without needing a Demat account.
2. Through Offline Distributors
Investing through offline distributors allows you to invest in a variety of mutual funds. These distributors guide you through the investment process and provide a physical paper acknowledgment of your investment.
However, this method might involve paperwork and may not offer the convenience of tracking all your investments in one place.
It’s a traditional way of investing in SIPs without a Demat account.
3. Through Online Distributors
Investing in SIPs through online distributors is a modern and efficient method. These platforms offer a comprehensive, paperless investment experience.
They provide access to a wide array of mutual funds, allowing you to diversify your portfolio according to your investment goals and risk tolerance.
One of the key advantages of using online distributors is the ability to track all your investments in one place. This feature enhances convenience and allows for better financial planning.
Importantly, investing through online distributors does not require a Demat account, making it an accessible option for many investors. These services are typically free for the investor.
4. Through Online Investment Platforms
Online investment platforms like Dhan have revolutionized the way we invest in SIPs. These platforms provide a user-friendly interface that allows you to invest in a wide range of mutual funds without the need for a Demat account.
The entire process is paperless and can be done from anywhere, making it highly convenient for the modern investor.
Dhan, in particular, is known for its seamless user experience and extensive mutual fund options in the mobile app.
It’s an excellent choice for both novice and experienced investors looking to start their SIP investment journey. Always remember to do your due diligence before investing.
We have recently introduced Weekly SIP on the Dhan platform. Do watch this YouTube video for more information
Conclusion
Investing in SIPs does not require a Demat account. Various methods, including direct investment through AMCs, offline and online distributors, and online platforms like Dhan, make the process accessible and convenient.
These methods offer a range of mutual funds to choose from, allowing investors to diversify their portfolios.
Remember, it’s crucial to do your research before investing to ensure it aligns with your financial goals.
