SOA or demat? How the way you hold mutual funds affects costs and flexibility

Zerodha and Upstox hold mutual fund units in demat form. Groww, one of India’s largest investing apps, made demat the default for all new mutual fund purchases from June 2025, unless users opt out.

Existing investments can continue in SOA format.Investors can also buy funds directly through an AMC’s website or via the Mutual Fund Utilities platform. Both routes store units in SOA format.Demat holdings currently do not natively support systematic transfer plans (STPs) or systematic withdrawal plans (SWPs).An STP allows investors to shift money from one fund to another within the same AMC without redeeming units.

An SWP allows investors to withdraw money at regular intervals. Both features are widely used by retirees and investors managing cash flows.A recent consultation paper by Securities and Exchange Board of India has proposed enabling STP and SWP transactions for mutual funds held in demat form, although the rules have not yet been finalized.Another limitation is portability.

If mutual funds are held in demat form, redemptions must be made through the same broker or platform.With SOA holdings, investors can transact through multiple channels—including the AMC website, MFU or other investment platforms—giving them greater flexibility.SOA also has a cost advantage.Maintaining an SOA account is free, while demat accounts may involve account-opening charges, annual maintenance fees and transaction costs depending on the broker.Despite these limitations, demat accounts offer some advantages.They allow investors to hold multiple asset classes—shares, bonds, exchange-traded funds and mutual funds—in a single account.A single nomination also covers all assets in a demat account. In contrast, SOA holdings require a separate