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Can I take a loan to invest in the stock market?
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sparkly
#21 Posted : Saturday, August 10, 2013 7:18:03 AM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
Yes you take a loan to buy shares. Its called leverage!

Question is, should you?

This depends on your personal circumstances, status of the market, risk tolerance and terms of the loan.

If:
1. You have the means to service the loan, without relying on cash flow from the stock.
2. You are a very experienced and knowledgeable stock picker.
3. The market in general or a stock you are interested in are very cheap (or about to "break out").
4. You can tolerate stock ups and downs without stressing (Note that leverage multiplies you potential returns as well as risks).
4. You can get a very cheap or free loan that will allow you to make a profit from small stock movements.

THEN you can take a loan to buy shares. OTHERWISE you should not.
Life is short. Live passionately.
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mBiaLoss
#22 Posted : Saturday, August 10, 2013 9:01:31 AM
Rank: New-farer

Joined: 6/23/2010
Posts: 52
Location: Majuu
@Sparkly,

1. I have other means of servicing the loan independent of the stock

2. Am not experienced or knowledgeable about the stocks, but I have been luck previously (Bought Sasini at 6.30 and sold at 15 but not a lot of shares)

3. Some stocks am seeing are really cheap, that the company can either go bankrupt of up. I don't see how further down they go except bankruptcy!

4. I am an expert in tolerating market fluctuations. Bought Safaricom at 4 solid at 7 and bought at 3 and just sold at 7. But dew to low vol investment I don't think am getting much. Bought Access K at 35 and at 20 and now is at what 9 bucks....that is one stupid stock. But I have learned from it!

5. I can get a cheap loan (at 7-10% interest). If take loan for 1-2yrs. And then pay out of pocket. Will the stock hold my value and return my interest and a profit? Can the stock return 20-30% in 2yrs for me to justify the loan? That is my question.


6. Am aware also that I can loose everything and that is a risk associated with business!
As an investor I behave like a tick, patiently waiting on grass and larch onto the first cow that shows up. As an investor I dont behave like a tick...I jump off the the cow as soon as am fully engorged before it dies...
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mkonomtupu
#23 Posted : Saturday, August 10, 2013 12:07:02 PM
Rank: Veteran

Joined: 2/10/2010
Posts: 1,001
Location: River Road
mBiaLoss wrote:
@Sparkly,

1. I have other means of servicing the loan independent of the stock

2. Am not experienced or knowledgeable about the stocks, but I have been luck previously (Bought Sasini at 6.30 and sold at 15 but not a lot of shares)

3. Some stocks am seeing are really cheap, that the company can either go bankrupt of up. I don't see how further down they go except bankruptcy!

4. I am an expert in tolerating market fluctuations. Bought Safaricom at 4 solid at 7 and bought at 3 and just sold at 7. But dew to low vol investment I don't think am getting much. Bought Access K at 35 and at 20 and now is at what 9 bucks....that is one stupid stock. But I have learned from it!

5. I can get a cheap loan (at 7-10% interest). If take loan for 1-2yrs. And then pay out of pocket. Will the stock hold my value and return my interest and a profit? Can the stock return 20-30% in 2yrs for me to justify the loan? That is my question.


6. Am aware also that I can loose everything and that is a risk associated with business!



Leverage is good if you know what you are doing. I have done it for KCB rights at 17/=, uchumi when the market went south and NIC when it was at 25/=. I have made enough cash to pay back the loans(interest at 12%) and still have capital gains to keep in my money market fund and enjoy.

Borrowing works best when the market has sunk. You buy at the bottom and you throw your money big time. Right now the market has recovered its full value and start to look overpriced.

You need to pick a company and study it well otherwise you will burn your fingers. Concentrate on maximum 3 companies and buy like you are buying a property, have a long time horizon like 3 years. Learn to say that you are buying companies instead of saying you are buying stocks or shares. That way you will make a proper valuation of the price you are paying.

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mwekez@ji
#24 Posted : Saturday, August 10, 2013 4:36:33 PM
Rank: Chief

Joined: 5/31/2011
Posts: 5,121
mBiaLoss wrote:


...

3. Some stocks am seeing are really cheap, that the company can either go bankrupt or up. I don't see how further down they go except bankruptcy!



Which specific stocks are we talking about here @mBiaLoss? ...
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mBiaLoss
#25 Posted : Saturday, August 10, 2013 6:11:20 PM
Rank: New-farer

Joined: 6/23/2010
Posts: 52
Location: Majuu
mwekez@ji wrote:
mBiaLoss wrote:


...

3. Some stocks am seeing are really cheap, that the company can either go bankrupt or up. I don't see how further down they go except bankruptcy!



Which specific stocks are we talking about here @mBiaLoss? ...



Mumias sugar, kenya airways and kenol kobil. How low can they go?
As an investor I behave like a tick, patiently waiting on grass and larch onto the first cow that shows up. As an investor I dont behave like a tick...I jump off the the cow as soon as am fully engorged before it dies...
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mwekez@ji
#26 Posted : Saturday, August 10, 2013 7:18:54 PM
Rank: Chief

Joined: 5/31/2011
Posts: 5,121
mBiaLoss wrote:
mwekez@ji wrote:
mBiaLoss wrote:


...

3. Some stocks am seeing are really cheap, that the company can either go bankrupt or up. I don't see how further down they go except bankruptcy!



Which specific stocks are we talking about here @mBiaLoss? ...


Mumias sugar, kenya airways and kenol kobil. How low can they go?


... very risky counters. i believe nobody can tell how low they can go
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obiero
#27 Posted : Saturday, August 10, 2013 8:34:35 PM
Rank: Elder

Joined: 6/23/2009
Posts: 14,256
Location: nairobi
mwekez@ji wrote:
mBiaLoss wrote:
mwekez@ji wrote:
mBiaLoss wrote:


...

3. Some stocks am seeing are really cheap, that the company can either go bankrupt or up. I don't see how further down they go except bankruptcy!



Which specific stocks are we talking about here @mBiaLoss? ...


Mumias sugar, kenya airways and kenol kobil. How low can they go?


... very risky counters. i believe nobody can tell how low they can go

KQ is unlikely to go any lower than KES 9.20
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mwekez@ji
#28 Posted : Saturday, August 10, 2013 8:43:27 PM
Rank: Chief

Joined: 5/31/2011
Posts: 5,121
obiero wrote:
mwekez@ji wrote:
mBiaLoss wrote:
mwekez@ji wrote:
mBiaLoss wrote:


...

3. Some stocks am seeing are really cheap, that the company can either go bankrupt or up. I don't see how further down they go except bankruptcy!



Which specific stocks are we talking about here @mBiaLoss? ...


Mumias sugar, kenya airways and kenol kobil. How low can they go?


... very risky counters. i believe nobody can tell how low they can go

KQ is unlikely to go any lower than KES 9.20


he he @obiero. your signature¡¡¡ you must be having many of these chips
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obiero
#29 Posted : Saturday, August 10, 2013 10:25:02 PM
Rank: Elder

Joined: 6/23/2009
Posts: 14,256
Location: nairobi
mwekez@ji wrote:
obiero wrote:
mwekez@ji wrote:
mBiaLoss wrote:
mwekez@ji wrote:
mBiaLoss wrote:


...

3. Some stocks am seeing are really cheap, that the company can either go bankrupt or up. I don't see how further down they go except bankruptcy!



Which specific stocks are we talking about here @mBiaLoss? ...


Mumias sugar, kenya airways and kenol kobil. How low can they go?


... very risky counters. i believe nobody can tell how low they can go

KQ is unlikely to go any lower than KES 9.20


he he @obiero. your signature¡¡¡ you must be having many of these chips

I do and im still loadin up.. I am followin the approach of Sunil Shah, the Kisumu tycoon who made a killin from pickin the correct bottom for KCB in the 90's
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Siringi
#30 Posted : Sunday, August 11, 2013 5:41:39 AM
Rank: Elder

Joined: 6/8/2013
Posts: 2,517
Sikia kiyana. Now that you must take the loan, listen to the signature of one wazuan quoting siyui Einstein, " ?buy land they dont make it any more. . . " The balance you can give your stovk broker for gambling . Come back after five years and thank me.
Sell the shares ujenge hiyo plot or better still. . .Uza plot and invest in shares or another plot.
"😖😡KQ makes money for everyone except the shareholder 😏😏 " overheard in Wazua
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