(Last Updated: August 1, 2019)
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Taking Loan to Invest in Mutual Funds

  • Dear Friends,

    My knowledge about investing is close to nothing. Successfully ran a elearning business for the last 10 years, as my small business clients are out of business or reducing expenditure, I’m out of business.

    I have some debts too. Now, I have a property( my last asset) on which I’m borrowing 20 lakhs for 11 month period.

    Purpose: to start a small venture which gives me a decent return.

    However, I require INR 5 lakhs to be invested on business now, and the business may require some pumping in for marketing and sales in later stages.

    Could guys kindly advise where should I invest my remaining money of INR 15 lakhs (WHERE AND HOW). I’m considering mutual funds( as they provide decent returns and it doesn’t have a lockin period). Could you add an advice on how to vigilant in this present turbulent times too?

    Monthly payout as interest for the amt borrowed will be 40k only. My business returns + mutual funds income = should take care of my monthly expenses( interest + my expenses) and growth.

    As my business grows, then there shouldn’t be problem. Kindly suggest as I can’t afford to make mistakes at this juncture ( though my mindset is always ready to take calcuated risks).I look forward to your valuable suggestions.

  • Hey,why are you borrowing money to plan investments.You might be paying a high interest on your loan, so the EMI (interest+principal) repayment shall increase your overall financial burden.

    Taking loan for business seems fine.But,borrowing for investing in mutual funds, that too such a big amount seems a bit odd.Kindly,analyse different factors like interest paid on loan that has to be done on monthly basis.Also the, interest that you shall receive on investment is not sure(not fixed) and you can earn that only if you invest for longer duration.So,before taking any decision just check your risk horizon and needs.

    If your business grows, you can anyways start investing regularly.

  • I am not in favor of borrowing money for investing on any market as invesrment is a risky option. No one gives you guarantee of returns in the form of profit on the money markets. So, you need to invest with your own money and if you have some other sources of permanent income. Thank you!

  • @landpel Very rightly said! Borrowing money for investing doesn't sound a good option. We should invest our money i.e. any savings that we are able to do on our own. Systematic financial planning helps a lot in investing in the correct manner over a long period of time.

  • It will be the worst thing in your life if you invest the borrowed money on the investment market. These markets are highly risky and if you will come up with borrowed money then an extra pressure will be mounted on you. If you lose then you will be traped badly. Stay safe!

  • I don't have more idea related to this. You can take help of some financial expert.

  • I would say taking loan for the investment could be your one of the biggest mistakes.

  • @sundar Hey, that's not a good idea at all. Investments should be out of the surplus money you have. If you don't have extra money now don't fall in the debt trap further. Wait till you have more of funds. Then think to invest.

  • @sundar said in Taking Loan to Invest in Mutual Funds:

    Could guys kindly advise where should I invest my remaining money of INR 15 lakhs (WHERE AND HOW). I’m considering mutual funds( as they provide decent returns and it doesn’t have a lockin period). Could you add an advice on how to vigilant in this present turbulent times too?

    I don't suggest you to go for equity funds for two reasons.

    1. It isn't suitable for short term. from last year it went as down as 0 to 15% (small to mid cap)
    2. It's harder to recover the loss from lumpsum investment than SIP.

    You are not in position to pay systematically. I suggest you to diversify lumpsum in debt funds if that helps. Please visit to financial expert, he is a doctor to the sick money but you should know how to avoid the wolves in sheep clothing.
    Wish you best in your business.

  • @KP_Trader Hi, your suggestion seems to be good but only if a person has surplus money. Here the question is: whether loan amount should be invested in mutual funds?
    Do you really think a person should increase his loan liability and then start investing in mutual funds? I mean, won't that increase his overall financial burden? The burden of EMIs including high interest. Then, what if he doesn't get adequate returns on his investment? This shall further add to his financial burden.
    What are your views on it?

  • I see a lot of people disapproving your choice to take a loan to invest in mutual funds. So after reading their comments you must know you are treading into dangerous waters. But if you still want to go ahead with it, I am no one to judge. To be honest, my friend does it, too. But he has been doing this for a long time. He knows the ways of the market and has taken margin loans to earn profit, too. Once when I was investing as well, he referred a website that gives instant personal loans. I told him then that I couldn’t afford to take such risks and carried on with investing the money I earned. If you want to apply for loan you can visit their online platform and check out their offering. They give instant loans and provide you with flexible tenure options. But still I would caution you to not overuse this opportunity. All the best.

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