How Can I Buy Index Funds Without A Demat Account?

07 Feb, 20245 mins read
How Can I Buy Index Funds Without A Demat Account?

What are Index Mutual Funds?

Index mutual funds, often known as passively managed funds, replicate the performance of a certain market index by tracking it. These funds are well-liked by investors looking for broad market exposure without having to engage in active management because they seek to mirror the results of the underlying index. In contrast to actively managed funds, which use fund managers' judgment to outperform the market, index funds follow an underlying benchmark index's composition and returns without actively managing them. Popular Indian indices that these funds track are the Sensex, Nifty 50, and others.

The underlying principle of index funds is that they invest in the same equities that comprise the chosen index. The index fund will hold a portfolio that duplicates those 50 equities in the same percentage if the index, for instance, comprises of 50 stocks. This replication method eliminates the need for continuous active management and reduces associated expenses.

Types of Index Funds in India

The financial landscape of India provides investors with a wide range of index funds, enabling them to match their investments to particular investing themes or market segments. Notable index fund categories in India include:

  1. Nifty Index Funds: Nifty Index is tracked by 50 large cap stocks from various sectors. They provide investors an exposure to the top companies in the stock market.
  2. Sensex Index Funds: Sensex is the benchmark index of the Bombay Stock Exchange. The performance of these funds is replicated by thirty large-cap stocks. If you want to invest in companies that are the most well-established and well-known in the Indian stock market, Sensex index funds are a great choice.
  3. Thematic Index Funds: Thematic index funds concentrate on particular industries or themes, such renewable energy, healthcare, or technology. Investors have the option to focus on sectors they think will perform better, providing a more specialized method of building portfolios.
  4. Sector Specific Index Funds: Index funds that are sector-specific focus on a certain industry. The banking, IT, and pharmaceutical industries are a few examples. Funds might be deliberately allocated by investors according to their assessment of particular industries.

Benefits of Index Funds

  • Reduced Cost Ratios: Index funds have a reputation for being inexpensive. Lower expense ratios result from less active management needed to track established indices. For investors, this cost advantage means increased returns.
  • Minimal Engagement of the Fund Manager: There is less dependence on fund managers' judgment because index funds are passive. Because of the lower danger of human interference, index funds are a desirable choice for people who like a methodical, rule-based approach.
  • Cross-Sector Diversification: Diversification across industries and themes is made possible by investing in several index fund kinds. By reducing the risks connected to the performance of specific companies or industries, diversification makes a portfolio more resilient and stable.
  • Uncomplicated Investment Method: Investing with index funds is simple since they follow the index they track. The fund's structure and strategy are simply comprehensible to investors, rendering it suitable for both rookie and experienced investors.
  • Flexibility in the Building of a Portfolio: Investors can customize their portfolios according to their investing objectives, risk tolerance, and market forecast by choosing from a variety of index fund types. Having this customization makes it easier to build a strategic and well-rounded investing portfolio.

Ways to invest in Index Mutual Funds without a Demat Account

  1. Investment-related platforms: Index mutual funds can be directly purchased through a number of online investment platforms without the need for a demat account. By offering investors a user-friendly interface that allows them to explore, choose, and purchase a variety of index funds, these platforms function as intermediaries. Investors can quickly register, complete the necessary KYC processes, and start their investing journey with these platforms.
  2. Companies that manage assets: Investors wishing to purchase index mutual funds can deal directly with asset management companies. AMCs frequently offer both offline and online investment options, giving customers the freedom to select the one that best suits their needs. Investors can start the investing process, submit the necessary paperwork, and make direct investments in the index funds that the firm offers via the AMC's official website or physical locations.
  3. Distributors of Registered Mutual Funds: Intermediaries between investors and mutual fund houses are registered mutual fund distributors. These distributors can help with the investment process by streamlining transactions and offering advice to investors on which funds to choose. For individuals without a demat account, registered mutual fund distributors simplify the investing procedure, even if certain transactions may still require documentation.
  4. Portals for Online Investments: Mutual fund transactions are the area of expertise for several online investing platforms. These platforms provide a selection of mutual funds, including index funds, to investors without demat accounts. Through these websites, investors can easily open accounts, submit the required paperwork, and make investments in the index funds of their choice. Additional services including portfolio management tools, performance tracking, and investment insights are frequently offered by the portals.

Benefits of using a Demat Account

Demat account which is also called as Dematerialized Account, is an electronic account that holds financial securities in the digital format. Demat account enhances the overall investment experience for those wanting to go into investing in index funds.

  • Demat accounts streamline the process of index fund investments and eliminates the need of paper work.
  • A demat account acts as a single location for managing and tracking all securities. Investors may evaluate their total market exposure with ease thanks to this consolidated perspective, which also makes portfolio management easier.
  • With a demat account, you can keep records electronically. Every transaction is electronically documented, including the buying and selling of index fund units. This improves the investment's security while also making it simpler for investors to access and examine transaction history as needed.
  • Purchasing and selling index fund units is made easy and efficient with a Demat account. Because trading is so simple, investors may take advantage of market opportunities quickly and liquidity is improved.
  • Transaction settlement is facilitated more quickly with demat accounts. The electronic settlement method speeds up the transaction when an investor purchases or sells index fund units.
  • Electronic statements and alerts for all transactions and holdings are sent to demat account holders. Investors are alerted about modifications to their portfolio, dividend disbursements, and other pertinent updates through this real-time data. Improving decision-making and investment monitoring is made easier by this transparency.


To sum up, index mutual funds provide a reliable and passive investment option. The most important thing is to match your investment plan with your financial goals, regardless of whether you use independent portals, an AMC, or a registered advisor for advice. Index funds offer a diversified and affordable approach to take part in the market's growth regardless of whether you have a demat account or not. Select the route that best fits your style, then set off on a quest for sustained financial gain.


  1. What are the disadvantages of buying index funds without a demat account?

There are a few disadvantages to investing in index funds without a Demat account.

  • Limited Convenience: Keeping track of paper documents for transactions can be difficult if you don't have a Demat account.
  • Delayed Settlement: When buying and selling index fund units, the lack of a Demat account may cause settlement times to be delayed.
  1. What documents do I need to invest in index funds without a demat account?

To invest wtihout a demat account, we need the following documents:

  • PAN card
  • Address proof
  • Bank account
  1. Which platforms allow me to buy index funds without a demat account?

There are several investment platforms that allow one to buy index funds without a demat account like:

  • Asset management companies
  • Online investment portals
  1. Are there any additional fees or charges when buying index funds without a demat account?

Generally when buying index funds without a demat account, there are some additional charges:

  • Transaction charges
  • Service charges like for portfolio management
  1. Is it safe to invest in index funds without a demat account?

If you choose reliable platforms, investing without a Demat account is secure. Ascertain if the platform complies with accepted security guidelines and is governed by SEBI. Choosing reputable investment channels reduces risks even though a Demat account provides additional convenience and security.

disclaimer: the information provided in this blog is for general informational purposes only. it should not be considered as personalised investment advice. each investor should do their due diligence before making any decision that may impact their financial situation and should have an investment strategy that reflects their risk profile and goals. the examples provided are for illustrative purposes. past performance does not guarantee future results. data shared from third parties is obtained from what are considered reliable sources; however, it cannot be guaranteed. any articles, daily news, analysis, and/or other information contained in the blog should not be relied upon for investment purposes. the content provided is neither an offer to sell nor purchase any security. opinions, news, research, analysis, prices, or other information contained on our blog services, or emailed to you, are provided as general market commentary. stack does not warrant that the information is accurate, reliable or complete. any third-party information provided does not reflect the views of stack. stack shall not be liable for any losses arising directly or indirectly from misuse of information. each decision as to whether a self-directed investment is appropriate or proper is an independent decision by the reader. all investing is subject to risk, including the possible loss of the money invested.

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