SOA vs Demat: What’s the Best Way to Store Your Mutual Fund?
When you invest in mutual funds, your units can be stored in one of two ways: in a Demat account or in the Statement of Account (SOA) form. Each method has its own benefits and considerations.
Statement of Account (SOA)
In this method, the Asset Management Company (AMC) issues the units directly, and these are managed by Registrars and Transfer Agents (RTAs).
Demat
In this method, the units are held by a depository participant, similar to how shares are stored in a Demat account.
SOA vs Demat
Choosing between SOA and Demat for storing your mutual funds can be a critical decision for investors. Each method has its own set of benefits and considerations that need to be evaluated based on individual investment goals and preferences.
The Demat account offers centralized management of investments and ease of access to various securities, including mutual funds, shares, and Exchange-Traded Funds (ETFs). This method is suitable for investors who prefer a streamlined approach to manage all their investments in one place. Additionally, Demat accounts provide the convenience of electronic transactions and simplified record-keeping.
On the other hand, the SOA method offers a cost-effective solution with no additional transaction or maintenance fees. It allows for smaller investment amounts and supports SWP and STP, making it a suitable option for those who seek flexibility and lower costs. However, the SOA method may require more administrative effort to keep track of multiple accounts and transactions.
Investors must consider their investment horizon, financial goals, and individual preferences when deciding between SOA and Demat. Both methods have their unique advantages, and the choice ultimately depends on what aligns best with the investor's needs.
Frequently Asked Questions
SOA: Yes, you can do that.
Demat: No, you have to enter your order in units.
SOA: Sure, you can also do a Systematic Transfer Plan (STP).
Demat: SWP and STP are not supported.
SOA: There is no transaction fee.
Demat: Transaction and account maintenance fees may apply.
SOA: You cannot invest in ETFs and shares.
Demat: You need to open a Demat account to invest in ETFs, shares, and bonds.
SOA: A separate nomination is needed for each AMC.
Demat: A single nomination covers the entire account.
SOA: No, but you can take a loan against your mutual funds.
Demat: Yes, you can pledge your mutual funds and get a margin.
SOA: Visit the RTA website to download a consolidated statement.
Demat: You can view all holdings directly in your Demat account.
SOA: You can use the RTA website, AMC, and Mutual Fund Utilities (MFU) to transact.
Demat: You cannot transact anywhere else if you lose access to your Demat account.
SOA: No, you cannot transfer; you will have to sell them.
Demat: Yes, you can transfer mutual funds to another Demat account as a gift.
Conclusion
SOA often outperforms Demat due to its cost-effectiveness and flexibility in accessing funds.
