Does it makes sense to take personal loan to invest in equities?

Suppose if I take out a personal loan at 10% p.a. of say 10 lakh amount for 4 years with 2 years lock in period.

My monthly emi would be around 25k. Let’s assume if I am able to meet that expense from salary and if I invest that 10 lakh in diversified portfolio with high treynor ratio that can get about 20 to 30% return p.a. with annual rebalancing.

Then even if that portfolio fetches 20% pa for four years then it would result in around 7 to 8 lakhs profit.

Does this makes sense or there is some calculation error or I am missing anything?

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The question you have asked has a big “IF”.

There is nothing pre-written that you will get 20% returns in the next 4 years.

Do not trade or invest with borrowed money.


Sir every day people trade with borrowed money.

I know nifty has almost doubled in last 1 year but stocks don’t follow nifty much.

And if some brokers like zerodha start providing margin funding then it can get pretty sick but it can blow up like archegos capital.

No it does not make sense at all to leverage by taking INR loan from India at 10%.

Leveraging makes sense if you are borrowing from overseas market at super low rates of less than 3% and then use the proceeds to invest in stock market. Even this has a caveat, your salary should be comming in foreign currency so that you can repay the loan without bothering too much about exchange rate fluctuation. (even this is discouraged, but people do a shut eye as it is kind of forced savings)

Even this option is risky if your returns do not meet with the exchange rate fluctuation of INR.

Which fund gives you a return consistentenly at 20 to 30%.

Instead as you say, you can repay the loan at 25,000 per month. Invest this portion every month in the same fund which will give you 20% to 30%. This would be a better strategy than taking a loan and paying them 10%. (Assuming you get 20 to 30%).

Good you referred about Archegos Capital. I am sure you must have read about the entire story on how this person lost USD 20 billion in two days. If things can go wrong to a professional shuttered hedge fund/trader, you can think of what will happen to a not so experienced, capital starving individual.

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Come to market for trading or investing with the money that you can afford to loose. There is no guarantee to what the market is going to do next.

See 2000 to 2008 was a bull run then u would have got 20 or 30% pa but who knows that from 2021 to 25 or 28 its gonna be a bull run it maybe a flat one or even a bear ones no one can predict markets , but the thing is u should know when to exit positions , actually entering is just non sense , exits are important , so if u are confident that u can make 20 to 305 a year then go ahead but always have a back up plan

I am not talking about investing in Index funds, I am talking about investing in portfolio with high treynor ratio.

I don’t know why people look at index before investing, I mean surely in :ox: run probability of making good returns are higher but stocks can move 15% in a day unlike index irrespective of the market sentiment.

So if I make portfolio of stocks which has a history of getting higher excess returns and has low beta then in the long run i.e 4 to 5 years history will repeat itself.

ya anyways if u are really good at identifying those stocks then u are get to go .
see tatsteel and few other thy didnt move much for years together but suddenly they will give 100 to 300% returns , so identifying and timing is important i feel if u are good at both , the no can stop u

I don’t think we need to time if we want to be invested for half a decade.

but if the stock has high growth potential but it didnt move for 5 years , but on 6th year it gave high growth what will u do at that time , ok if u have been holding for 1 year and it didnt move for 12 months on 13th month it gave 20 or 30 % returns what will u do , so i feel timing is everything

Not if you have about 6 to 8 stocks in portfolio.

yep diversification helps upto a level but not as expected , if u really diversify then u should look at index movement also

I had made virtual portfolio with around 33 stocks in it, on Dec 2019 i.e pre pandemic it has now return of 50% i.e. around 30% pa. I know 1/2 a year return doesnt define return for the coming years. But still if this much diversified portfolio yielded 30% pa irrespective of pandemic then what would have happened if I have made a bit concentrated portfolio.

I know investor behaviour would have been different if it was real money but still

There is another portfolio which I made 3 months back using same model but included small and midcaps

I know its too early to say anything about this portfolio but still results are good so far.

ya its just a confidence of a person and risk involved in it , if u area really confident of it then surely go for it and always have a backup plan

Looking at all previous responses, seems like you have already figured out everything and looking for forum members to confirm your biases.
If you are confident on your skills and figured all out, than go ahead take that loan and invest it. Don’t wait for forum members to approve.

In 4 years either you will have handsome profit or would have learned a good lesson in risk management. Either ways, it would be beneficial. :slight_smile:


My two cents to OP - I don’t see any due diligence. I don’t see any back-testing of whatever your strategy is. You are showing examples from the last one year where we are seeing unprecedented appreciation thanks to unique situations.

You seem to be convinced based on those weak signals and using that to form your PoV.
As @Akash_Shah already mentioned, you don’t need to convince anyone here. If you need someone here to say you are right, that might not happen.

To validate your hypotheses, maybe don’t take too big a chance. Best of luck regardless.

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Actually the model can be backtested but only problem is survivorship bias i.e. it won’t include stocks that have been delisted.

Is there any way to get over this? Is it possible to get past data of stocks that got delisted? I am thinking to test for last 20 years.

You have hit the nail on the head. This is like learnt how to fly Boeing on Microsoft flight simulator on PC (i dont think this sim still exist) and then thinking, I truly can fly the real airplane.

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FYI I have invested my money last week in portfolio made using this model. Let’s see how it goes.

This is the portfolio that I am currently invested In. Portfolio start date is 16th June 2021. Currently portfolio is down 0.97%.

Stonk Proportion Entry Price
RADICO 4.78 731.95
KIRIINDUS 8.84 577.76
JBCHEPHARM 15.54 1532
ASTRAZEN 5.55 3786
ESCORTS 11.4 1203
BAYERCROP 10.94 5727
DIVISLAB 14.05 4323
ALLSEC 7.98 387
GALLISPAT 5.95 52.75
RPGLIFE 8.76 478

Disclaimer: Invest at your own risk.

Dude, trust me! once you put in borrowed money in the market its a different psychological game. If you have been going by the perf of your virtual portfolio, you will be in for a big surprise when you actually put in real money. I