Investing/Trading using Personal/overdraft loan

#1

Is there any legal implication or restriction regarding use of loan money taken from bank to trade or invest??

#2

No implications.

But it is indiscipline. Best practices is to avoid trading with borrowed money.

3 Likes
#3

Never ever do it… U will face constant fear of losing… Even if slight profit is achieved u will try to book it in fear of losing d same… Either trade with ur own money or do paper trade till u have that much money… All d best

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#5

trading from the borrowed money is not advised according to me but i would like to draw your attention towards the following aspects which are to be kept in mind while doing borrowed money trading:

  1. your ability should be to service interest costs at time.
  2. you should not take loan more than 10 % of your total previous assets combined.
  3. your dividend income from shares in which you invested the borrowed money should be used for paying monthly / yearly interest charges.
  4. do not expect more than 18 to 20 % returns on your traded capital, invest in proportion to that so that your idea about gains should be realistic.
  5. trade should be smart with the borrowed capital but my personal suggestion is that you should not take unnecessary risks even if your age is in the 20’s to 30’s bracket.
  6. for more info on how Warren Buffett did stock trading rather stock arbitrage trading using borrowed money , go through the book , Warren Buffett and the art of stock arbitrage.

happy trading to you .

1 Like
#6

Before you make such tricky decision try to take every aspect of trading into consideration. You have to be able to make continuous profits on market but they need to be increased for interest that you are paying on loan in order to have some rational to take loan for trading purposes

#7

It’s very very uncommon thing I assume so please try to make it very very real anyway no matter how you really put it. You should understand that it’s really done to realise that something are with that interest rate which you really need to earn om top of earning.