Mutual funds can be held either in dematerialized account or as statement of account (SOA) which is an improvised physical holdings method. With the launch of open-ended schemes which allowed investors to redeem units in full or in partial, buy additional units as well as start with a systematic investment plan (SIP) mutual fund houses began issuing SoAs. This form of holding which is similar to holding of securities in demat form is however not exactly identical. Of late to enhance convenience and reduce paperwork, mutual fund houses have begun issuing consolidated statement of accounts.
Holding Mutual Funds Units in SoA vs Demat Account
Statement of Account is exclusively for mutual funds while in a demat account your financial portfolio, including equities, mutual funds, debt instruments including NCDs can be tracked all through a single platform.
SoA on the other hand gives detailed information with respect to transactions in a particular scheme, and provides all such details including the current investment value of the individual's folio, load charges etc. which are not given in a demat account.
So, Now Which Mode Will Suit You As an Investor?
If you buy ETFs frequently, holding mutual funds in demat form makes sense as these securities can be bought and sold only through the exchanges and for that demat account is a must.
Also, the demat mode scores over the Statement of Account when it comes to transmission of units i.e in a case when units are to be transferred from a deceased unit holder's folio to his or her legal heir. The demat account facilitates unit transfer through the mechanism referred as off-market transfer. In it all the concerned beneficiary has to do is open a new demat account in his name, provide a copy of the deceased unit holder's will, death certificate together with other requisite documents and get the units transferred.
So, the prime advantage of holding mutual funds in a demat account is the facility to transfer units.
Holding Demat Units in SOA is Advantageous in Such Situations
But when it comes to liquid funds holding units in SOA mode is advantageous as the crediting and thereafter the redemption of units by way of debiting takes time in case of demat format as it is executed at the DP's end.The liquid funds held in SOA format facilitate buying and selling on the same day.
STP or systematic transfer plan option is also not available in the demat mode. Nonetheless, units held in demat form allow an investor to do SIP and at the same time switch between schemes of the same fund house.