Is it okay to borrow Php100,000 from a bank and then invest it on stocks?
If i’m going to borrow Php100,000 from a bank, payable in 12 months, my monthly amortization would be P9,833.33. I am planning to invest it in internet cafe. But in our town, we now have 18 internet shops, that’s why i’m thinking of investing it in other business. But I am also curious about stocks and would like to try it. Would it be okay? Any advice will be highly appreciated.
Wow …. NO
Can it be done? Well… if you borrowed it for another purpose and then switched to that, I’d say NO.
However, there are certainly people who do borrow money to invest. BUT — it’s often a losng proposition since the investment not only has to produce a gain, but enough of a gain to pay for the cost of borrowing the money as well.
Generally a bad, bad, BAD idea.
stocks are fine just remember it’s just as easy to lose money as it is to make money is stock trades. In 12 months with the cost of interest and original note principle due you may be setting yourself up for a lesson that you may not get over.
Sounds like a very bad idea. $2,100 (100,000 PhP) is a lot of money. Can you afford to lose it all? Investing in stocks can be very risky and you could lose all your money. Can your town support another Internet cafe? Will it be profitable? You should KNOW the answer (not be just guessing) before you invest in the business. Also, be careful about people trying to get you to invest. Some people don’t have good sense, and, some people are dishonest.
If you are confident you can make money trading, then it’s not a bad idea. But, you need to be honest with yourself about it and your chances for success.
By the way, borrowing money to make money is a very common practice. This is how banks, insurance companies, and even bookmakers make money. It’s called an “interest rate spread.” i.e. you borrow money at a low rate and reinvest it at a higher rate. Your profit margin is the spread between the two rates.