How to Buy Index Funds Without a Demat Account?

Mar 22nd 2024

How to Buy Index Funds Without a Demat Account? Over time, index funds have become more and more popular. The Association of Mutual Funds in India states that the assets under management (AUM) of index funds was Rs 1.73 lakh crore in FY21–22, a 197% increase from Rs 58,173 crore in FY20–21.

Despite increased knowledge and demand, a lot of individuals still mistake index funds for stocks. Like mutual funds, index funds make equity investments based on the stock composition of the index. Nevertheless, investing in index funds does not require a Demat account, in contrast to stock investments.

Just like with other mutual funds, index funds are available for investment. Additionally, there are several options to invest in mutual funds online while at home, all made possible by technology advancements.

What are Index Funds?

Passive mutual funds that replicate well-known market indexes are known as index funds. The fund manager just invests in all the stocks that make up the index that is to be tracked; they don't actively choose the sectors or individual stocks to include in the fund's portfolio. Each stock in the index has a weight that is almost exactly equal to the weight of the stocks in the fund. This is a passive investment, meaning the fund management builds the fund's portfolio by simply copying the index and aims to keep the portfolio always in line with the index.

The fund management must purchase or sell stock units whenever a stock's weight inside the index changes in order to match the stock's weight in the portfolio with the index. Even though passive management is simpler to implement, tracking inaccuracy means that the fund doesn't always provide returns that are equal to those of the index.

How to Invest in Index Funds Without a Demat Account?

Mutual fund investments can be made through regular plans or direct plans. First, let's clarify what direct and regular plans aren't.

Direct plans have a lower expenditure ratio since they do not impose commission or distribution costs. However, the mutual fund firm charges a commission when you purchase a normal plan via a middleman like a distributor. As a result, the expenditure ratio for regular plans is larger than for direct plans.

Purchasing index funds can be done online or offline, depending on the plan you select. Here are a few of your choices.

Read More: 5 Types Of Returns In Mutual Funds In 2023

Through AMC’s office or website

The majority of mutual fund businesses have an app or website where they sell their investing product. By going to the AMC office, you may also make investments offline.

Keep in mind that diversity is impeded when purchasing mutual funds from a single AMC. Investing in several fund firms is ideal. Even if you may invest by visiting many fund houses, the process might be laborious.

Separate Portals

Investing in several mutual funds is offered by numerous separate platforms. You must create an online account and register. If it is not yet complete, these portals also finish your KYC. After creating your login, purchasing or selling money online is simple. These portals also offer an internet-based platform for monitoring your investments.

MF Utility

Investing in index mutual funds may also be done using the MF Utility platform. The portal allows you to conduct a variety of mutual fund transactions, such as switch, redemption, and investing activities. It eliminates the need to create several accounts with different AMCs by enabling you to transact in mutual funds from many AMCs through a single platform.

But keep in mind that the MF Utility platform is self-service, so you won't get any individualised counsel or advice on investing.


Using your bank to make index mutual fund investments is one of the most used investing strategies. Mutual fund agents also include banks. To find out if your preferred mutual fund is being sold, you can stop by your bank. Just watch out for sellers who may try to get you to invest in particular funds in order to receive the highest possible commission. This is a great choice after you've chosen the mutual fund to purchase.

MF Distributors/Agents

You have the option to invest in many mutual funds through a variety of offline distributors. Additionally, these distributors could come to your house to advise you on the best course of action. These advisors offer advice to investors on the newest plans or shifts in the industry.

That being said, there are a few drawbacks to utilising mutual fund agents, including increased costs, conflicts of interest, fewer investing possibilities, and a lack of transparency.

Read More: What Is Large Cap Mutual Fund?

Things To Consider While Investing in Index Funds

The following are some crucial factors to think about before investing in index funds:

Tracking Error: Investors should look for index funds with the lowest tracking error before selecting one. There may be variations from the index's results because index funds seek to replicate the performance of an index. It's commonly referred to as a tracking mistake. A smaller tracking error in an index fund is a sign of superior fund performance.

Read More: How Mutual Funds Are Better Investment Options?

Investment goal: It is important for investors to carefully weigh their goals in relation to the index fund scheme. For the long term to yield the most benefits, both should be in harmony.

Risk category: In their investing portfolio, investors should make sure that a healthy balance of actively managed funds and index funds is present. This is due to the possibility that the valuation of index funds may decrease during a market slump. Because index funds track an index, they are less vulnerable to the risks and volatility associated with equities.

Read More: Top 5 Small Cap SIP Funds to Consider in 2023

Expense ratio: While index funds are significantly less expensive than other mutual funds, there may be differences in the cost ratios of different index funds. Investors need to select an index fund with a low cost ratio in order to optimise returns.


How Can I Do Direct Investments in Index Funds?

Investing in index funds may be done using Investkraft app, which offers an easy-to-follow investing process, or by going to the AMC office of the fund of your choice. The process of making an investment can also be started by contacting a broker.

How Much Money Should I Put into Index Funds?

An investment in index funds should be made as a component of a diversified investment portfolio. You can choose to make lump sum or small-sum investments in index funds through SIP, based on your financial situation and investing objectives.

What Benefits Do Index Funds Offer?

Many benefits are provided by index funds, including reduced cost ratios, investment diversification, liquidity, and effective asset allocation.

The Conclusion

Purchasing index funds is a simple process. To start investing, all that is needed is to carefully analyse your investment strategy, select an index fund, and adhere to the paperwork.


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