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Anyone who has made good money from successful investments, whether from shares, bonds, stocks, or mutual funds, will tell you that you should invest at all costs. It is in investing that people really become wealthy. Your money should never sit stagnant, especially if you have significant savings. Letting it accrue only a fixed amount of interest is a tremendous waste of potential.
Even if you have a risk averse personality, you can find the right investment for you. Bonds are generally reliable, while owning shares is an attractive proposition to anyone in the business world. But what about if you don’t have any capital to invest?
Most people assume that, without any savings or capital, investing just isn’t a possibility.
What are you going to invest?
But maybe you’ve considered getting a personal loan to start investing. While you’re going to be paying interest on the loan, you have the chance to make a lot more than the loan is going to cost. Over the repayment period, you might be confident you can make significant gains out of the money you’ve loaned, while safely paying it back.
There are those who will tell you to avoid this strategy at all costs, while others say it is a no-brainer. Here is what you need to know if you’re considering using a personal loan to invest in the stock market.
Start With The Interest Rate
Of course, the very first step is to get a quote on what interest rate you can expect to pay on the best personal loans. Obviously, the number will depend on the conditions of the loan. A shorter repayment period will generally allow for a lower interest rate. High risk loans are going to have high interest rates.
However, it is not as easy as calculating the interest rate against the potential investment gains. While you’ll be paying less interest if you take a short-term loan, you will not be able to grow your investment capital as much. Your relatively big monthly installments will prevent a fair amount of exponential growth on your investment. On the other hand, high interest rates may render your potential earnings insignificant.
In other words, you’re going to have to do a lot of calculations, making sure you take everything into account. A degree in actuarial science would obviously help, but it’s not necessary. As long as you know what to expect from the ups-and-downs of investments, you can make good predictions and measure all the factors.
Know All About Investing
Going in blind, on the other hand, is a recipe for disaster. Taking out a personal loan comes with risks, and there is nothing guaranteed in the stock market. Investment gurus have made some firm predictions for the stock market in 2020, but a whole range of unexpected events can change everything in a second. Just look at how China’s markets have crashed due to the coronavirus.
If you have no experience in investing, take a few months to get to know how the markets work before taking out a personal loan. By the time you get that loan, you should be confident you have the tools at your disposal to ensure that, at the very least, break even. You should have a good sense that you will in fact make some good money, even if there are a few unexpected low-points.
Investing a Personal Loan
While there are some who would advise against it, investing with a personal loan is a good idea if you’re confident you have the skills. There are no guarantees in the stock market, but then again there are no guarantees in life. Only those who are willing to embrace that uncertainty ever become rich.
