Mutual fund units can be held in two ways—SOA/folio mode (units recorded with the AMC/RTA under a folio) or demat mode (units held in your NSDL/CDSL demat account via a DP). Both are valid, but the experience differs because the transaction “route” changes. ​Here’s the key practical point most investors should know: If your MF units are in Demat, redemption/transactions are routed via your DP/broker/exchange platform—not directly through AMC/RTA folio-style transactions. Some AMCs also mention that if an investor wants to redeem through the mutual fund route for demat-held units, they may first need to rematerialise (demat → SOA) and then place the redemption.

So why is SOA often enough? ​ SOA keeps your mutual fund investing “native” to the AMC/RTA ecosystem—simple for SIPs and long-term goal-based portfolios, without adding demat dependency for MF-only investors.

When does demat make sense? If you want a consolidated view/holding experience with other securities in one demat account, demat can be a convenience choice (with DP/broker as the operating layer).