Using an online wallet for investing is not an easy task. Monitoring your investments in MF using wallets can be a cumbersome activity for many.
There is now a proposal for allowing mutual fund investments to be completed using online wallets. This looks like an effort to ensure that there is an additional non cash option that is provided to individuals when they go out to invest but there are quite some details that need to be considered before jumping in to use this route. Online wallets are finding an increasing use in the new cashless economy in India and its addition for investments has to be considered in the face of its features and whether this is useful for an individual. Here are some points related to online wallets that need attention.
The online wallet operates in a specific manner as first one has to load money into the wallet and this is then used for various spends. Since the amount from the wallet is going to go for a mutual fund investment it becomes important for the individual to see the manner in which this is being loaded. There are various ways in which the wallet can be loaded and this includes using a debit card or internet banking or even a credit card. Now the usage of debit cards or internet banking means that the amount in the wallet has come from the bank account of the individual but if there is the use of a credit card then one has to be careful. Usage of a credit card means that the amount is borrowed for a short period of time. If this is paid before the due date of the credit card bill then there is no financial consequence of the whole move. However if this goes into the interest cycle then the individual is actually paying a very high rate of interest on the amount. This if used for investments would actually result in a situation where the individual is borrowing at a high cost and investing for a lower rate of return which is something that should not be happening. This makes it essential for one to see the manner in which the wallet is being loaded.
People usually do not keep large amounts in their online wallets because the amount that is present here is used for various expenses that are normally small in value. This brings an element of limitation to the mutual fund investment because it could mean that the individual might not find it useful to use the wallet for large investments but restrict this to smaller amounts. There are various conditions under which the mutual fund investment might be considered and if this is a regular investment through a systematic investment plan then this might prove to a good route to invest.
Tracking and managing
Using an online wallet for investing is not an easy task. The first thing that one needs to do is to keep the wallet stocked and this means having an additional layer present in the form of the transaction to get money to the wallet as compared to transferring money to the mutual fund directly. In situations where there is a regular amount going through the wallet it will be the role of the individual to ensure that there is some balance that is present in the wallet on the date when the amount has to be deducted. The other thing that most people are not familiar with is the transfer of money back to their bank accounts from the wallet. In case the wallet provider is your bank then it is easier as your bank account is linked but the situation is different when the wallet provider is an independent entity.