Investors prefer statement-of-account format for mutual funds due to flexibility during disruptions

While demat accounts offer consolidated control, statement-of-account holdings are valued for their accessibility and transparency, especially during system outages, prompting investors to reconsider their preferred mode of mutual fund holding.

For many investors, mutual fund units are safest when held in statement-of-account, or SOA, form rather than in a demat account, according to commentary on TradingQnA. The point is not that demat holdings are unsafe, but that they can be less flexible because redemptions are typically routed through the broker linked to the account. That extra step may suit some users, yet it can also become an obstacle if the broker’s systems fail at the wrong moment.

ICICI Direct notes that demat holdings place mutual fund units inside the same account used for shares and other securities, which can simplify tracking for investors who prefer a single portfolio view. But the same setup can also centralise control with the broker, while SOA holdings remain directly linked to the mutual fund house and its registrar. In practice, that means investors holding units in SOA format can usually access them through multiple routes, including AMC platforms, registrar websites and MF Central.

That difference matters most in a disruption. If a broker platform is down or if the broker ceases operations, a demat-based investor may have to wait until the account is moved before making changes. By contrast, SOA investors can generally continue to view and transact through other channels, which is why some advisers argue that convenience, not security, is the real advantage of demat.

There is also an administrative angle. Several personal-finance guides, including those from INDmoney and BasuNivesh, say SOA holdings tend to preserve cleaner records on purchase dates, unit age and tax treatment, while demat users may rely more heavily on broker statements for capital gains data. That can become awkward if a platform has technical problems. For investors who prioritise portability, transparency and easier access to tax records, SOA still looks like the more practical choice.