Today I was reading some articles advising people to take a risk on the stock market by purchasing stocks with money from personal loans. In order to become a successful investor, we have to consider both risk as well as returns. When we think more about the returns we get, we might miss the risk factors. Sometimes if we worry too much about the risks alone, we may not make proper investments and would keep the money idle.
I have to admit that I have done this in the past where I have bought stocks with the money I got from personal loans. My intention was to use the money for some other purpose but I got the funds arranged from a different source and I did not know where to keep these funds and at the same time get some returns. I then selected the stock market as the best place and invested the money in some of the stocks. All these happened about 5 years back.
Personal loan is a burden
Those who have already taken personal loans or any loans for that matter would already know about this. Personal loans are definitely a burden if it is not planned well. We have to make sure that we have more than 50 percent of our salary for our expenses. Having a loan repayment value or EMI that is over 50 percent of the monthly salary is definitely a burden. If there is some income from another source, it shouldn't look like a burden.
But imagine taking a risk with the personal loan amount on top of the existing EMI burden is even more dangerous. Some people might say that we have to take such risks at a young age as that is the age to grow our money. But if we are not taking a calculated risk, it can be a big problem and we might end up falling into a trap of debt.
Purchasing stocks can turn out positive
We have discussed all the negative aspects but there is definitely a great opportunity here too. I have personally seen people taking a small loan to invest in something and the investment turned out really well and finally, they ended up multiplying their money. One of my friends did this with stock market investment. He took a loan and purchased a few stocks. I have to say that he was lucky enough and his purchases did really well and the stocks did really well. He was able to book profits for more than 2 times.
He did not stop with that and recovered only the money to clear his debts and multiplied the remaining amount with the same strategy. I was with my friend when he did this and I was just copying his stock purchase pattern. I couldn't be as successful as him because I did not have enough investment compared to him. I did make some money in the process but the blind risk that my friend was taking was the reason for it to turn out really well. I wasn't ready to take such huge risks back then. Today I still think that I should have followed my heart and grabbed a few risks like that. I hope I get a new opportunity in the future.
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Posted Using LeoFinance Alpha
Taking loan and invest them into stocks and crypto can be a really good startegy. I was thinking of taking a loan and invest it into HBD if the apr remains the same 😬
Yeah I was also thinking the same thing. Even if we pay the tax, we would be getting 14% which is 2% higher than the loan interest rate.
aha interesting, indeed you are right let's see how things will go. 😅
I appreciate your honest reflection on the balance between risk and return in investing, especially when it comes to using personal loans.
It's true that calculated risks can lead to significant gains, as your friend's experience demonstrates. Sometimes, a calculated approach can prevent us from falling into a debt trap.
Yeah falling into a debt trap just takes only a few simple mistakes. So we have to also be very careful.
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If a person has to do it in the way you are telling, then a person should have a lot of knowledge so that he does not get harmed. Don't put your life in trouble. If he doesn't do it like this, his life will be in a lot of trouble.
I don't think it is wise to invest loan money.