{"id":2354,"date":"2018-11-10T10:55:37","date_gmt":"2018-11-10T05:25:37","guid":{"rendered":"http:\/\/capitalante.com\/?p=2354"},"modified":"2019-07-24T07:23:40","modified_gmt":"2019-07-24T01:53:40","slug":"investment-with-borrowed-money","status":"publish","type":"post","link":"https:\/\/capitalante.com\/investment-with-borrowed-money\/","title":{"rendered":"Investment with Borrowed Money – 3 Points to Consider"},"content":{"rendered":"

Equity or stock is such an asset class which involves certain risks. Many people invest in the stock market with a view to generating better returns than the debt instruments or govt. Securities. But some become fail and exit the stock market suffering a huge loss. This loss of money turns into a major problem when you make the investment in the stock market by borrowing from a bank or any non-banking financial institutions. Let’s discuss why you should not make an investment with borrowed money.<\/span><\/p>\n

Why you should not make an investment with borrowed money.<\/span><\/strong><\/h6>\n

When you borrow money definitely you are subject to pay off the money to your lender. Now you have lost your money in share market. How will you pay off the debt? <\/span>So to pay off the debt you will have to do anything. You may have to cut your household expenses or may have to sell jewelry or other valuable assets of your family. That is why it is suggested that you should never make an investment with borrowed money. Now let\u2019s see some major risk factors associated with it.<\/span><\/p>\n

Return Risk<\/strong><\/span><\/h6>\n

First of all<\/g> if you apply for a loan you will have to repay it within a scheduled time. Now when the market corrects, many good quality stocks correct up to 30%-40% from their all-time highest peak at which you bought the specific stocks. There is no certainty when the market will head again. As you will have to repay your borrowed money within the specified time and you don\u2019t know when the market will go up, so you will be in a big<\/g> trouble.<\/span><\/p>\n

Interest Rate Hike<\/strong><\/span><\/h6>\n

If the interest rate of your Personal loan is hiked by 2% what is your escape plan? With the increased rate of interest, an extra burden will come to you. The market does not guarantee a fixed return in short term. So it is not a wise decision to make the investment with the loan received at 14% interest and hope 30% return in 6 months.<\/span><\/p>\n