# Taking loan against property and investing in Nifty 50, good idea?

Let’s do the math. Lets say, I have 1 crore worth property. I take 60 lakh loan on it from HDFC Bank at 9% interest rate for 10 years.

Total loan taken: 60 lakh
Interest to be paid per year = 5.4lakh
Total amount to be paid after 10 years: 60 lakh + 54 lakh = 114 lakh.

Total amount Invested in Nifty: 60 lakh
Total amount after 10 years at 15% CAGR and assuming, we pay 5.4 lakh interest at the end of each year: 133 lakh.

Now we will be left with 133 lakh after 10 years, and then lets pay whole 60 lakh loan, and profit will be 73 lakh.

Nifty usually gives 15% over a year of 10 years, but even If it pays 9% in 10 years, we are not making any lose.

Even, If we lose 20% the first year due to bear market, and earn 15% every year for next 9 years, we will break even.

Thoughts?

Yeah, in rare cases, we may lose some money (10%), but that’s the risk worth taking, no?

Thoughts?

There is a similar topic created by another user. The concept is the same and many users have replied to this post.

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

How profit is 73 lakh? Even if you pay 5.4 lakh from own pocket, still you are paying it. Your net profit is 19 lakh, with 114 lakh capital (this is you have to pay, can’t deny it). Even bank FD with 5% rate will give more returns.

Do you really wanted to just “break-even” after 10 years?

Lets do the maths again.

Lets put 5.4 lakh (45K monthly) in SIP for 10 years.
CAGR = 9 %, Value after 10 years = 73 lakh
CAGR = 10 %, Value after 10 years = 86 lakh
CAGR = 11%, Value after 10 years = 100 lakh
CAGR = 12%, Value after 10 years = 115 lakh
CAGR = 13%, Value after 10 years = 132 lakh
CAGR = 14%, Value after 10 years = 151 lakh
CAGR = 15%, Value after 10 years = 171 lakh

I will pay 5.4 lakh monthly from the profit of the Investment? So I am making 73 lakh out of nothing.

This is my math: (All figure are in lakhs)

Year 1 :Share market profit at 15 % is: 9.0 interest paid is 5.4 New Balance is 63.6
Year 2 :Share market profit at 15 % is: 9.54 interest paid is 5.4 New Balance is 67.74
Year 3 :Share market profit at 15 % is: 10.161 interest paid is 5.4 New Balance is 72.501
Year 4 :Share market profit at 15 % is: 10.875 interest paid is 5.4 New Balance is 77.976
Year 5 :Share market profit at 15 % is: 11.696 interest paid is 5.4 New Balance is 84.273
Year 6 :Share market profit at 15 % is: 12.641 interest paid is 5.4 New Balance is 91.513
Year 7 :Share market profit at 15 % is: 13.727 interest paid is 5.4 New Balance is 99.84
Year 8 :Share market profit at 15 % is: 14.976 interest paid is 5.4 New Balance is 109.417
Year 9 :Share market profit at 15 % is: 16.412 interest paid is 5.4 New Balance is 120.429
Year 10 :Share market profit at 15 % is: 18.064 interest paid is 5.4 New Balance is 133.093

Now, lets pay 60 lakh loan. So profit is 133-60 = 73 lakh?

Make sense. But what’s the guareentee that you’ll get 15% per year? Share market can be bumpy ride. In case market remains stagnant (or worst case negative returns) for 5 years and then gives bumper returns in next 5 years, making 15% CAGR in 10 years. Will you be able to pay those 27 lakh from your pocket?

Its a high risk, uncertain gains my friend.

These hypothetical calculation makes sense and looks good only in hindsight ,once you put your real money on line every assumption you make will go for toss and you will left with only confusion .so a strict no to loan

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Just for the sake of argument.

Why not Gold? Refer - https://unofficed.com/gold-vs-nifty/

From 19/03/2007 to today (14/06/2021), Gold has 11.13% CAGR while Index has 10.77%.

And it is less volatile -

PS: Plus You will get a super happy wife.

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On a lighter note, I thought @RahulSharma95 was poking the red line by taking a loan and investing in Nifty 50. @unofficed has in fact crossed the red line! by asking why not Gold.

This has now made me wonder, why not Crypto, invest 60 lacks and repay the entire loan in one year time and become a billionaire.

Yeah Why Not?

It may work well if everything goes in your way but I personally don’t think it’s a very good idea. Stock markets are uncertain, so taking loans on properties for investing in stocks sounds a little risky for me.

15% CAGR does not mean that you will get 15% return annually. And if it gives negative or Zero return for 2 years, then I guess you’ll have to take more loan to pay even the previous interest.

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I can never consider this to be a good idea. There are chances that in the end you might have nothing. So think twice before doing anything.