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Where SOA MF Buying scores over demat

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statement of account (SOA)


Till about a year or so back, liquid funds were not available on stock exchanges through the demat mode. Now, liquid funds are available in demat mode, but you cannot buy and sell the units in a single day. Many large investors park money in a liquid fund for overnight duration only. If you buy liquid funds before 2pm, you get the day before's net asset value. And if you sell the same units before 3pm on the same day, you will get money the next day, at previous day's (today's) net asset value. In the demat mode, the crediting of units and the subsequent debiting of units takes time since it happens at the depository participant's end.


You can, however, buy a liquid fund in an SOA format on the stock exchange and then buy and sell the same day in the SOA format.


The operation is tedious for demat holdings, as units and money go through the stock broker's pool account. The broker has to reconcile the accounts on a daily basis to segregate investors' units and monies on a daily basis.


The delay and difficulty in reconciling the books on a daily basis is also the reason why daily dividend plans of liquid funds are also not available in demat mode. There is no such problem if you hold units in SOA format.


If you hold units in demat, you also cannot do a systematic transfer plan. Some brokers (on their own) offer systematic withdrawal plan, but not everyone. Systematic investment plans (SIP) and switches (between schemes of same fund house), though, are permitted in demat holdings.


Earlier, buying mutual fund units in demat form used to make sense if you already had a demat account and bought and sold equity shares of companies, as also bonds and non-convertible debentures. In that case, your demat account statement offered a consolidated view of all holdings. But from 2015, you get a consolidated account statement (CAS) for all your securities holdings, including mutual funds, irrespective of whether the latter are dematerialised or not.


An alternative to the liquid fund's demat holding conundrum is a liquid exchange-traded fund. Here, you can avail daily dividend plans and buy and sell the same day.



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