[newbiesaver]

First, I'd like to thank this site, the members for helping me out in my finances and introducing me to mutual funds, savings , investments , etc.. It has really really helped me a lot in my financial goals, in fact I should have listened to you guys 3 years ago.

Anyways this is an idea not be to be taken "seriously". Suppose I do this.

1.) I loan like 2 million pesos in a commercial bank let's say BDO , BPI or Metrobank, with an interest rate of 10 percent.

2.) Then I open up an online trade account, from citisec, bpi trade , or others. I try to use my 2 million pesos to buy 3 different stocks.

ex : ( these are sample stock prices only )

a. JFC - bought 100,000 shares at 2 pesos per share , lets say around 600,000.

b. TEL - bought 100,000 shares at 4 pesos per share , lets say around 600,000.00

c. COL - bought 100,000 shares at 3 pesos per share.

Let's assume in around 7 months ,

JFC shares are around 10
TEL shares around 6
COL around 12

You sell you shares to pay the loan + interest you got from the bank and keep on trading or transfter majority of the funds to a safer investment vehicle.

OR

3.) Use 2 million , invest in a mutual fund for like 3 years, bought ur mutual fund for like 200, on its 3rd year its 900 ,

So my question is, is this possible? Share some ideas if you can please, thanks !

[dyonisii]

yes, you can always do that. but problem is, stock prices don't have guarantees that it will always go the way you want them. you can earn, yes (i know someone who borrows money, buys, and sells, then pays his loan plus interest - thus earning him some for almost nothing) but it is a risk. trading in stock market is always a risk, so much more if your capital is from a loan.

many a book would always say that the money you invest/trade in the stock market is money that is spare -- something that you may not need immediately -- and something you won't feel bad if you would lose.

investing in mutual funds has a lower risk as compared to trading in the stock market. some mutual funds may guarantee you about 10% gain after five years. however, if something goes wrong, as in terribly wrong, mutual funds is not like deposits you make in a bank. the PDIC doesn't cover investments in mutual funds. so your capital can still go pfffft.

just my two cents...

[TSO]

This is called "trading at a margin" amd sorry, it's not a new idea...

My opinion? You better find a loan that lets you pay off all the interest at the very beginning, because the last thing you want is a
monthly/bimonthly/quarterly interest payment over the tenure, as that can not only encourages you to think in the short-term.

One of my relatives lost more than $30k USD (when USD:PHP rate was still around 1:50) doing just this and he was a strict day trader, with 3 computers on 24/7 and a hell lot of statistical indicators (around 17).

I don't really mind if my absolute return or something is less because my starting principal is lower so longas I make moderate returns on it. Of course, the problem is the loan repayment...

[newbiesaver]

Thanks , I have learned a new term, trading at a margin or margin trading.

>> http://www.investopedia.com/university/margin/margin3.asp

[TSO]

Well, there's another kind of margin system where you don't enter a loan, but it's like an investing partnership with the firm putting in most of the money, and where you are the managing trader. You keep all the profits made, but the firm will usually provide a clause in its contract that will allow it to terminate the "partnership" once their capital is affected.

The effect here is, you have leverage, and it can magnify your earnings and losses.

To be honest, I don't know how these companies stand to earn from this aside from increased commissions.

[ofwonlinetrader]

in citiseconline they have a margin trade..minimum of 200thou you must have on them before you can register for margin trade..

i have a friend who take a loan from the bank using his house as collateral to the loan then buy stocks during the bottom of feb to march 2009..he kept 6 months fund for the monthly amortization to cover his debt..then after 6 months he double his money when market is in bull run..he paid the loan plus the early settlement fee.

crazy but he makes money using borrowed money.

margin or leverage is risky but risk comes if you don't know what your doing.

[GIG]

Don't trade with borrowed money especially when you're a newbie. There is always some guy who gets lucky but just imagine the downside. Trade small and learn as you go along. In trading,after awhile, its not so much about the money, its more about the "thrill of the hunt".

WTF did I just say that hehe!! Then again its the bull run, traders are allowed a bit of hubris hehe!

[TSO]

In trading,after awhile, its not so much about the money, its more about the "thrill of the hunt".

Can I replace the word "trading" with "gambling"? XDDD

[CJ_MT]

Anyways this is an idea not be to be taken "seriously". Suppose I do this.

1.) I loan like 2 million pesos in a commercial bank let's say BDO , BPI or Metrobank, with an interest rate of 10 percent.

2.) Then I open up an online trade account, from citisec, bpi trade , or others. I try to use my 2 million pesos to buy 3 different stocks.


10% interest is huge. Here abroad, loans charge as little as  2.2% per year without tax. Better come here.

[arnel]

Anyways this is an idea not be to be taken "seriously". Suppose I do this.

1.) I loan like 2 million pesos in a commercial bank let's say BDO , BPI or Metrobank, with an interest rate of 10 percent.

2.) Then I open up an online trade account, from citisec, bpi trade , or others. I try to use my 2 million pesos to buy 3 different stocks.


10% interest is huge. Here abroad, loans charge as little as  2.2% per year without tax. Better come here.

@CJ_MT, saang bansa yan?

[rds]

10% interest is huge. Here abroad, loans charge as little as  2.2% per year without tax. Better come here.

2.2% per year!!! you must be joking...

[Dodong_Pobre]

2.2% per year!!! you must be joking...

It's not actually a joke Sir... Most banks that offer this low interest are those practicing Islamic Banking... Safe to say, Banks in Middle East.. I, myself is working in an Islamic bank here in Saudi. Our bank now has an offer of 1% interest per annum..Actually it's a promo offer we call it 1..2..3.. Program.. If you want your loan payable in 1 year they will charge 1% interest, 2% per annum if payable in two years and 3% per annum if payable in 3 years and above... Loan purpose is limited to three (Car, Real Estate, and Stock Trading).. Hindi lang yan... You have the option to start the charging next year 2011...Oh, and did I mention that its absolutely TAX FREE? I'm now actually impressed with the concept of Islamic Banking... kaso this 1..2..3 program is not applicable for us (employee) . Pero we are allowed to take a loan up to 6 months value of the salary package (depende sa years of service) @ zero interest payable in 1 year..So technically saying cash advance sya... Doon ko hinugot ang mga nilagay sa initial investments ko dito sa PMT..although hindi naman ganun sya kalaki (equal to 2 months of my salary package)...As a newbie and small time investor, thanks God dahil after about 7 months ang return na ng pera ko is 47.61% as of end of September... Lahat galing lang sa mga investments ko dito sa PMT...Sana matuloy-tuloy pa... kakastart ko lang ng Stock Trading this month maliit lang muna as newbie sa stock trading..pero ditong market ako ng invest (Tadawul-Saudi) and unang share na binili ko was the Bank where I'm working... hehehe..Long-term trader muna ako..for 3 months hindi ko gagalawin.. Timing sa declaration ng Annual Report... So far eh ok naman ang performance dahil income naman this 3rd quarter ung Banko... By January 2011 bibenta ko narin to...with a projection of 15% increase in stock value.. (insha'allah)

[arnel]

you must be very lucky since nandiyan ka sir,,, take advantage of it while you're there,,, wala niyan dito sa kinaroroonan ko eh,,,

[graphene]

@newbiesaver

you said it yourself. it's a crazy idea!
siguro gusto mo lang me magsecond the motion sa yo. hehehehe.
well then, i second the motion.
case closed.

[rds]

i have also loan in a bank here in uae, not islamic though, and it charged me 9.5% effective rate per annum...baka sa saudi lang yan na offer.

btw tell me is this 1, 2 or 3% is a fixed rate or what?

i'm just wondering how the bank will make profit with a very small loan charges.