In most cases, you need to have a dematerialization account to hold your investments. Such accounts are similar to a savings account. However, unlike holding cash, you hold your investments in an electronic form in your demat account.
However, not all investment products require you to have this kind of an account. Here are five options that do not require a dematerialization account.
1. Mutual funds
Mutual funds may be purchased through distributors or directly from the fund houses. Alternatively, you may invest in mutual funds through brokers on the stock markets. Until recently, you needed to open a demat account to buy mutual funds on the markets. However, now you may purchase these via registered advisors or brokers. You may even invest in Systematic Investment Plans (SIPs) of mutual funds without an online demat account.
2. Insurance policies
You may purchase all types of insurance policies such as life, auto, and Unit-Linked Insurance Plans (ULIPs) without needing a dematerialization account. An insurance policy may be purchased directly from the insurer or through an agent. You have the option to hold the insurance policies either in your demat account online or in a physical form as per your preferences.
Traditionally, Indians prefer to invest in gold to protect their investments against inflation. Today, you may buy gold in the form of Exchange-Traded Funds (ETFs) and equity-based gold funds instead of a physical form. However, you may still purchase this precious metal in the form of jewelry, bars, or coins. Jewelry is available from several stores while several financial institutions sell gold bars and coins. These may be held in a physical form and do not require a dematerialization account.
4. Fixed deposits
Fixed Deposits (FDs) have been a popular investment product for several decades. It is one of the safest and risk-free investment options offering guaranteed returns. You may purchase bank FDs directly from the institution. In addition to traditional FDs, banks offer other options such as flexi FDs, floating rate FDs, and overdraft deposits.
If you want to trade in futures and options (F&O), you will need to open a trading account with a broker. However, there is no mandatory requirement of a demat account opening to trade in derivatives. This is because when you trade in F&O, there is no delivery of security, which needs to be held in either physical or electronic format.
The aforementioned are some investment options that are available without the need for a dematerialization account. However, the process to open an account is simple and quick. There are several benefits of having a dematerialization account such as convenience and no risk of damage to physical investments. Therefore, consider opening an account for greater comfort.