India is changing. The youth are getting restless. They are experimenting with new technologies. Young tech-savvy youth in India, walk around with the latest smart phones and laptops. The youth in India have a powerful friend....Fintech..... Fintech has taken off like a rocket. What with mobile wallets, UPI, Aadhaar Enabled Payment System (AEPS), BHIM-Aadhaar APP and USSD, the youth in India could not have asked for better times.
If you are a youth in India living in these interesting times, you can now invest in mutual funds using your mobile wallet. Yes..you heard me right. Your mobile wallet is not just for making payments, it's much more. SEBI has made your mobile wallet a tool to invest in mutual funds.
Investing in mutual funds using your mobile wallet is not easy. Monitoring your investment can be very difficult. Then there are other challenges. Let's take a look at some of the challenges of investing in mutual funds using your mobile wallet.
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It’s the digital equal of a physical wallet. You can store cash and make payments using your mobile wallet. You open this account with any mobile wallet service provider. You then load money into your mobile wallet, from your bank account using internet banking, mobile banking, debit cards or even credit cards. You can pay for groceries, cab rides, petrol and diesel and even movie tickets, with your mobile wallet.
Recharge your mobile wallet with money from your bank account using your debit card and buy mutual funds? No problem, it's your money, anyway. You can also recharge your mobile wallet with your credit card and buy mutual funds.
This is where you (the young tech-savvy investor), needs to be careful. Using a credit card to load your mobile wallet and then investing in mutual funds is borrowing and investing. This is a strict, No.
Do you know that credit cards charge you an interest of 2-3% a month (Read the fine print)? Can your investments in mutual funds give a higher rate of return than the interest you are paying on the credit card? SEBI has made a proposal that you can invest in mutual funds using your mobile wallet, only if it is loaded through cash, net banking or debit cards. If you load your mobile wallet through credit card, cash back and promotional scheme, you will not be able to invest in mutual funds.
SEBI has made a proposal that the maximum investment per mutual fund in a financial year through mobile wallets, should be restricted to INR 50,000. Is this cap a good idea? This is a very good move as it encourages caution in investing. Investing in mutual funds is not like buying rice and bananas.
Mutual fund investments carry a warning. "Mutual Fund investments are subject to market risk. Please read the offer document carefully before investing".
But there's a problem...You might have more than one credit card or multiple digital wallets. How will this INR 50,000 limit be imposed and monitored?
Investing in mutual funds is serious business. You need to understand, risk in your investment. You also need to invest in mutual funds, depending on your financial goals. If you blindly invest in mutual funds without understanding them or seeking professional advice, you would have only regrets.
Mobile wallets showcase paid advertisements. Mutual funds pay money to advertise on mobile wallets. You could be enticed by these advertisements and invest in a mutual fund scheme which does not match your financial needs. SEBI has placed the onus on AMC's, to ensure mobile wallet issuers do not offer incentives like cash back, directly or indirectly for investing in MFs through them.
Investing in mutual funds through mobile wallets is exciting and also challenging. This is a brilliant move which encourages young, tech-savvy and even small investors to invest in mutual funds. The penetration of mutual funds in India could increase and household savings could flow into mutual funds. But these challenges need to be overcome. Be Wise, Get Rich.
Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.