Buying shares on a loan - Pros and Cons!
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Fundamental
Forum Discription: Discuss the operations and finances of any of your companies.Make the other participants aware on the investment opportunities available in a stock on PE free cash flow etc
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=615
Printed Date: 15/Apr/2025 at 6:42am
Topic: Buying shares on a loan - Pros and Cons!
Posted By: harshbhandari
Subject: Buying shares on a loan - Pros and Cons!
Date Posted: 23/Nov/2006 at 2:19am
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Dear Basant in one of the discussions you had mentioned that actual real estate is never a losing proposition because one holds it for very long periods (10yrs +). Going by the same logic, I have a thought process that what if we take a loan and invest in good companies whose management is excellent. One can pay of the loan with your future earnings just like you would for your house. Over a longer period the power of compounding will come into play and a sizable return can be expected.
e..g. what if i take a loan amount which can be paid back with next 3 yrs salary. This amount I invest in say, RCL, Indian Hotels, Educomp.
BY doing this I will have increased my holdings to a sizable amount (not in ,000 rs but in lacs).
Another advantage is that if i have identified a few good co's i could also ride out any correction or bear phase. Good co's will always come out winners no doubt.
Ofcourse the whole argument is based on identifying the right horse to ride your way to creating wealth!
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Replies:
Posted By: xbox
Date Posted: 23/Nov/2006 at 6:35am
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Taking loan for buying shares is definately wrong idea. Please avoid this and forget it for ever. It is perfect recipe for disaster.
------------- Don't bet on pig after all bull & bear in circle. |
Posted By: tigershark
Date Posted: 23/Nov/2006 at 8:08am
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never leverage yourself while buying stocks use the funds generated
from the capital gains yu have made to buy something that looks
valuable and with a margin of safety when you take a loan one thing is
sure the banker will definately get rich whether you will also bcom
rich only time will tell
------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: basant
Date Posted: 23/Nov/2006 at 9:18am
To me taking a loan is not wrong at all. See you pay 10% to a Bank and if you can make 20% from your investments you should be able to doa clean 10%. But with a loan do not put that money into any company whose capital can be lost for example if you buy shares of say Educomp it is a relatively new company so with that leverage as long as you know what company you are buying into (preferably blue chips) it should not be wronmg. Money is not lost payiung interest but in repaying the capital that is lost.
I started my investing carrer by taking a loan from a Bank http://www.theequitydesk.com/forum/forum_posts.asp?TID=290 - which I documented in this section but the index wes at a PE of 10 times at 3000. Things have changed but still I continue to hang on to that leverage in the hope of making that incremental return (Actual return - interest cost). It is insignificant to me at the value of today's portfolio but as they say old habits die hard!
FInally 3 out of 4 people lose money by buying stocks on borrowed capital because they bet on the wrong company. Take a loan when we see a June like situation but then at those levels we are already told to hold cash  ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 23/Nov/2006 at 9:50am
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I would heed you take a look below: Whenever taking loans for buying shares, assume one and only one thing: MARKETS SHALL CRASH THE NEXT DAY FROM THE DAY YOU BOUGHT THE SHARES(from loan amount). So what's your plan of action in such a case?
I have an idea and hope that helps:
Suppose you want to buy 10 lac worth of shares based on loan.
Loan amount: 10 lac.
Loan interest: 10%
Yearly interest: 1 lac rupees.
Usually such loans are given in overdraft facility, so only the money you withdraw from your overdraft account(which bank shall create just for your loan) will be charged an interest on.
So, keeping a crash in mind and assuming crash shall be for a minimum of 3 years, you keep approximately 240,000 rupees in the overdraft account and use the rest 760,000 rupees for your investment.
What happens in this case:
1) Market crashes next day and stays there for even 3 years. Still you are able to pay the interest for 3 years without any hassles.
So, you are taken care in case of even a bear market to a good extent and I have given the bear market quite sometime: 3 years.
So, what is the ONLY THING YOU HAVE TO WATCH FOR AND REALLY WORK HARD ON?
Answer: The company you are investing into should be a really good one and should under worst of cases, give a minimum absolute return of 100% in 3 years' time.
So, do your research well on that. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 23/Nov/2006 at 10:43am
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Basically that thesis means to buy solid companies and keep some margin in your loan account!!! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 23/Nov/2006 at 10:50am
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Yes, I guess so sir. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: harshbhandari
Date Posted: 24/Nov/2006 at 12:12pm
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Hi!! Appreciate your views and caution.
My thought process is that if we are able to identify a blue chip with a decent growth record (say, RComm, Indian Hotels) and have a small amount invested in a pure growth play (say, Educomp) and then repay the loan amount as an EMI from whatever is the savings capability in 3 yrs. I am hopeful that the invested amount doubles in 4-5 yrs time.
This is similar to buying a high priced house (e.g. 50-75 lacs) for which we take a home loan and then pay it over 10-20yrs. The EMI is usually less than the savings per month that one is generating.
Similarly but on a smaller scale (rather than buying a 50-75 lacs house being paid over 10-20yrs) we can take a loan amount and then invest in the said 3 co. in the ratio of
Indian Hotels - 40% , RComm - 35%, Educomp - 25% (or a fin. services co. such as HDFC Bank, Rel. Capital, or TV18)
This looks like a mix of brick & mortar safe co. and some growth co.
I want to make this experiment and see if I can create some decent wealth.
Your views.
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Posted By: basant
Date Posted: 24/Nov/2006 at 12:30pm
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I would not put Educomp in that category since its business is evolving. How about buying HDFC Bank from a loan taken from HDFC Bank and then repaying them. The Bank would charge 10% andf the stock should definetely grow at 25%!!!
But you cannot borrow against shares in excesss of Rs 20 lacs also that amount is not allowed to be put into the markets. What you do is genreally not looked at but buy solid companies like the HDFC twins and I am sure you would do well. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: xbox
Date Posted: 24/Nov/2006 at 12:51pm
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One can always analyse historical events but future assurance can not be garrenttied by this.
Taking loans for share trading is bad and must be avoided in any circumstances. Right now we are at all time highs but even at lows one must avoid this practice.
My stand is very clear. Gamble only on own money.
------------- Don't bet on pig after all bull & bear in circle. |
Posted By: go4lalit
Date Posted: 24/Nov/2006 at 3:27pm
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I think instead of taking a loan & paying EMI, if we invest the same EMI amount systematically (Possibly through SIP) , we should be able to generate decent return with less risk.
If we invest systematically, it would reduce risk. Taking loan & investing in one shot is definately not a good idea.
For example, whatever you pay as EMI, you can buy HDFC every month & if HDFC continues to grow at 25%, I am sure you will be able to build wealth.
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Posted By: basant
Date Posted: 24/Nov/2006 at 3:43pm
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Different concepts really just like buying your investment in installments. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kaushalchawla
Date Posted: 24/Nov/2006 at 4:07pm
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Personally, I have been told by my Uncle to put only your money in share market and not the borrowed one. Because if you loose borrowed money, you will loose much more than just money. ------------- Warm Regards, Kaushal |
Posted By: BubbleVision
Date Posted: 24/Nov/2006 at 5:24pm
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Harsh... i would like to advise you to be ready for an emotional Rollercoaster ... if you really take a loan to invest. It is not that it cannot be done... But it requires a whole lot of courage and Descipline to achieve big gains.
BasantJi... thanks for that link and your experience once again.
One Interview i will read again is of Martin Cook ... (in Market wizards -- third book).. who was in debt of over a Million Dollars .. and took a huge loan to trade.
Thanks a ton for initiating this discussion.
------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: BubbleVision
Date Posted: 24/Nov/2006 at 6:02pm
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BasantJi.... i would like to request you write something about Martin Cook's interview (particularly the loan incident when he called his mother ... and his mother's reaction (or the lack of it) gave Martin the confidence to trade)... here... Please..It will help all those who dont have the book.
I know that i am putting a lot of work on you..Apologise for that.
I would have done that but lack of energy in my fingers is a big constraint as i keep typing all day....
 If anyone else has read the interview ... please post it .. it would be highly appreciated by all the members.
The conversation between Cook and his mother (during loan time) are worth reading ... even if i had to steal the book. They are AMAZING! It would really make a very good archive here in the forum.
------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: India_Bull
Date Posted: 24/Nov/2006 at 7:08pm
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I totally agree with you Basantji.HDFC and HDFC Bank are rock solid stocks..Though personally I feel ICICI is growing fast , worry is they are diluting equity.. ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: India_Bull
Date Posted: 24/Nov/2006 at 7:29pm
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Hi Vipul,
I agree to disagree with you. Buy taking a loan you are using other`s money to build wealth which is not possible if you use your own resources. (Lets say I am taking a loan of 10-20 Lakh)
I am assuming you are getting minimum return of 25% on your investement on a loan which you have taken at a rate of 12 %.
Though I have not taken any loan so far for this and have seen people repenting for doing so , the idea is not bad and we shd be able to identify the proper stocks for the same. ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: xbox
Date Posted: 24/Nov/2006 at 9:21am
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I agree to disagree with you. Buy taking a loan you are using other`s money to build wealth which is not possible if you use your own resources. (Lets say I am taking a loan of 10-20 Lakh)
I am assuming you are getting minimum return of 25% on your investement on a loan which you have taken at a rate of 12 %.
Though I have not taken any loan so far for this and have seen people repenting for doing so , the idea is not bad and we shd be able to identify the proper stocks for the same.
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SANDEEP, if making money is so simple then why people are doing other jobs to make money. If recipe so making money is so full proof then ppl all around the world will join stock market. In that case there will be any banks. They themself will put money in markets rather than lending to you.
Can anybody in this world garrentee 25% return ? (if yes, then I have business for him). ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: kulman
Date Posted: 24/Nov/2006 at 10:08am
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Very interesting discussion! If you really listen to the successful investors, the first thing they advise is "Investments in shares MUST be out of your SAVINGS only". Any kind of leveraging is a dangerous recipe for disaster. I have seen my close raltives lose their net worth early this year as they thought that money making was so easy...and tried to 'invest+trade' on borrowed money generated via "Personal Loans" and "Top-up Loans on existing home" routes. They got over-confident due to 'beginner's luck'.
I totally agree with the view "money making is not so easy".
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 24/Nov/2006 at 10:12am
Again Kulmanjee though I do not advise everyone to buy shares on leverage but it is not 100% incorrect. The point is why people go wrong is when they buy any tom, dick and harry from their money. As they say money does not have any colour and the stock does not know that it is in your DP because you have taken a loan or broken your FD. As long as you do not mess up buying junk stocks (trying to double money each year) you should do OK. Now if you do not buy decent stocks you would lose money irrespective of whether it is your own or borrowed. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 24/Nov/2006 at 10:18am
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Very true...but if you look at how much one would lose if he invests own money (savings) in junk stocks & compare it to putting borrowed/leveraged funds in same stocks...that will make the point clear, won't it?
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: basant
Date Posted: 24/Nov/2006 at 11:01am
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The extent of loss in both cases will always be 100% because the Bank will never wait foir the stocks to hit ground zero. FInally it is about the right stocks and most of the people who borrow are Mungerilals so they become the suckers. I have said this on the forum that today I started on leverage and that too they are in a few stocks but by what ever reason they have worked out well so no one is complainning but many of the people who knew that I started on borrowed capital in 2001-02 told me to trade and take out the interest part but I declined so today that initial capital (borrowed money) has become more then a 10 bagger in totality but at that time things were different; PE's were compelling etc etc. On the whole it is really dangerous but not 100% incorrect. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: BubbleVision
Date Posted: 24/Nov/2006 at 11:27am
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I am in Full agreement with you BasantJi.... most of the people who borrow are Mungerilals so they become the suckers. It all comes down to knowing what you are doing... However taking a loan to "invest" in F&O could act as playing with petrol in one hand and fire on the other. BTW, did you read that Cook interview.... ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: basant
Date Posted: 24/Nov/2006 at 11:36am
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Yes, I have been awefully tied up but would update that for sure! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: BubbleVision
Date Posted: 24/Nov/2006 at 11:50am
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Ok...that would make a great Archive here....Sorry for bothering you too much...do when you have time.. i have already reread that yesterday night. ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: Siddhartha
Date Posted: 25/Nov/2006 at 8:34pm
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Basant ji I found one academic exercise but I dont understand it in a practical way.
It is about duplicating call with share and credit.
There are only two possiblities of price for XYZ share at the date of exercise of call.
Two psossibilities are K1 = 40 Rs OR K2 = 60 Rs.
Todays Prise is K0 = 50 Rs.
Option duration = 1 Year
intrestrate of credit = 10 %
Basic call price X = 50 Rs.
Future Cashflow:
As a result u can duplicate call's result with Sahre and credit.
How can I see this thing practically?
Bubblevision how can u evaluate this exercise?
Regards,
Siddharth.
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Posted By: Ajith
Date Posted: 25/Nov/2006 at 10:31pm
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Leveraging is double-edged,extremely dangerous in stocks,because no matter what ,things can go wrong but it all depends on personal asset back-up and ability, guys reading these posts will have different abilities,luck, asset and liablity profiles so my personal policy is to discourage the idea that leveraging for purchase of shares is a good idea. ------------- Ajith |
Posted By: akshayan
Date Posted: 15/Dec/2006 at 11:09pm
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Don't you take a personal loan to buy shares or buy using margin financing from brokers? In that case rate of interset may be 16% rather than 10% (home loan rate is approaching 10% now). Historically stock markets have not generated more than 16% return over a long period of time. It may not a good idea to buy stocks on loan IMHO. |
Posted By: harshbhandari
Date Posted: 15/Dec/2006 at 1:17am
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Hi!! Though i do appreciate the views on this forum, i have not been able to convincingly decide either ways (to take a loan to buy shares).
For the people who are against this,... i have one query... currently there are buyers who are buying 1 cr. property and of course it is on a loan.
Assuming that a lot of these purchases are for investment (property is not ready or the location is very far etc. etc.)
So, using the similar logic but on a smaller scale, I decide that my next 3 years monthly savings goes to paying of a personal loan. Using that money i buy good quality (large cap) and some growth stocks. I will restrict the purchase to a max. of 3-4 stocks so that i reap the benefits of appreciation.
If the market goes down, I will be able to ride out the correction as I have bet only 3 yrs fwd savings and also becoz of my conviction in the quality of the stocks.
the only thing that could go wrong in this that the entry price is too high. But if the management is good and the growth is good, with some patience I should be able to come out positive at the end of 3 years from the loan.
Like this early week was an excellent period to purchase some stocks.
Your views.
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Posted By: basant
Date Posted: 15/Dec/2006 at 8:08am
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So, using the similar logic but on a smaller scale, I decide that my next 3 years monthly savings goes to paying of a personal loan. Using that money i buy good quality (large cap) and some growth stocks. I will restrict the purchase to a max. of 3-4 stocks so that i reap the benefits of appreciation.
__________________________________________________________
Personal loans carry high interest take a loan against your shares it would cost only 10% so the chances of making money is more in a loan against shares scheme then otherwise. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: italics
Date Posted: 11/Nov/2007 at 12:30pm
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Basantji, the more i read and the more i find out, it's becoming clear to me that one of the keys to building substantial long term wealth is the art of leveraging! While no leveraging is ever risk free, and leveraging on it's own is risky I was wondering if you or any other of the more experienced members of this forum could start a thread on leveraging. And tell us about various ways to do it that you may know and what are the best available options today for a retail investor. I think it would be really enlightening and help a lot.
Of course I would stress here again that leveraging is inherently risky and that must be acknowledged right at the start! But even so, if used well it can be a great tool in creating substantial wealth for those with a small base to start with!
I look forward to your and other views on this!
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Posted By: basant
Date Posted: 11/Nov/2007 at 1:50pm
I am ALWAYS leveraged not through the F&O route but bank finance or somewhere else.
But I never allow my leverage to get more then 20% of my networth so that I do not get wiped out in a market decline.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 11/Nov/2007 at 2:15pm
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Yes Basant sir, if that is the case...then can you share the details with an example. Is Stop Loss etc. necessArY in leveraged positions. I wont like that as that would somewhat become like trading.
I would be reallY glad to read about a leveraging story Basant sir. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 11/Nov/2007 at 3:13pm
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Nothing special i just buy and hold because I intend to do beter then the cost of capital (interest) without being stripped out of my position. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 11/Nov/2007 at 4:53pm
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Usually the interest is how much sir? North of 15% I thInK. Am I right? And can you share some example of a case of whAt happeneD when some shares(bOught on leverAge) went down and stayed down for a long period of time(upto 1 year)? ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 11/Nov/2007 at 4:56pm
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It changes but is at 15% for the moment.
For the 2nd part of this question the bull market has ensured that such an untoward incident does not happen. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: deveshkayal
Date Posted: 11/Nov/2007 at 5:17pm
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I was wondering if you or any other of the more experienced members of this forum could start a thread on leveraging. And tell us about various ways to do it that you may know and what are the best available options today for a retail investor. I think it would be really enlightening and help a lot.
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Click http://www.theequitydesk.com/forum/forum_posts.asp?TID=931&PN=2 - here to know about the leveraging strategy of Rakesh Jhunjhunwala. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: Mr. V
Date Posted: 11/Nov/2007 at 2:21am
Is the 15% interest on Loan Against Shares ? |
Posted By: India_Bull
Date Posted: 11/Nov/2007 at 2:29am
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Hedging is a double edged sword , only few people can utilise that very effectively, if you (in general) think you are one of them yes go ahead...and sky is limit !!! ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: basant
Date Posted: 11/Nov/2007 at 6:59am
That is the interest on loan.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Mr. V
Date Posted: 11/Nov/2007 at 9:14am
| Hmmm...Isn't that a bit high ? I thought the interest rate on a "Loan Against Shares" used to be about 10-12%. |
Posted By: basant
Date Posted: 11/Nov/2007 at 9:25am
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Good old days! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 23/Nov/2008 at 12:10pm
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Always remember John Maynard Keynes' words: “The market can remain irrational longer than you can remain solvent.” Though it's not related directly to this topic, many promoters seem to have fallen for borrowing against shares..... http://economictimes.indiatimes.com/articleshow/3743043.cms - The root of Vijay Sheth’s problems can be traced back to June last year when he pledged most of his 16% stake to IL&FS and Motilal Oswal. A banker said his outstanding is Rs 200 crore to IL&FS alone. His outstanding to Motilal Oswal could not be ascertained though an industry source said it could be Rs 75-100 crore. At the ruling market price of Rs 830-Rs 850 a share, his shareholding in June last year was worth Rs 500 crore. The problem began when the lenders gave margin calls as the valuation of the collateral fell below the loan amount. This has put Mr Sheth in a fix as he does not have more shares to put up as collateral. The valuation of the collateral is around Rs 175 crore at Thursday’s price of the stock. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: vijayM
Date Posted: 04/Sep/2011 at 6:36pm
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I was checking icicibank for loan against shares. The approved list of shares is not available on website. I doubt whether TEDXI stocks are part of their approved list since these are small/mid caps. Any one has any idea/details about loan against shares from icici bank?
------------- If a business does well, the stock eventually follows:Warren Buffett |
Posted By: basant
Date Posted: 04/Sep/2011 at 7:10pm
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Except Hawkins and Page they take almost all other stocks. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: rajnsharma
Date Posted: 04/Sep/2011 at 7:14pm
Hi Vijay, I have opened a LAS(Loan against share) account wih ICICI recently just to keep the extra money in my hand in case market falls. You can get up to 20 lakhs as loan. I haven't used them so far. The interest rate is 13% for which I signed up. It has moved up to 13.5% now. Hawkins and Page are not in the list of approved shares. I can send you the list of scripts. Please pm me your perosnal mailid. Regards, Raj ------------- Wall Street makes money by it's activity, while you can make money by your in-activity - Warren Buffett |
Posted By: vijayM
Date Posted: 04/Sep/2011 at 7:17pm
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Thanks basant ji & rajan ji rajan ji my e-mail is sent to you thru pm ------------- If a business does well, the stock eventually follows:Warren Buffett |
Posted By: rajnsharma
Date Posted: 04/Sep/2011 at 8:19pm
One of my major holding IL&FS Investment Managers is also not in the list. ------------- Wall Street makes money by it's activity, while you can make money by your in-activity - Warren Buffett |
Posted By: rajnsharma
Date Posted: 04/Sep/2011 at 8:21pm
Hi Vijay, Please check your personal mail. I have sent the sheet. Regards, Raj ------------- Wall Street makes money by it's activity, while you can make money by your in-activity - Warren Buffett |
Posted By: basant
Date Posted: 20/Jan/2013 at 9:27am
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Leevrage should be around 10% of portfolio and in some opportunistic case you can take it to 20% but never beyond that plus the idea should be to repay the leverage off with operating income(salary, business etc) and not by selling off the same shares which we had bought with leverage money. This strategy will help us remain disciplined.
However leverage is a dangerous game and cuts both ways.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: retailinvestor
Date Posted: 21/Jan/2013 at 12:25pm
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Basantji- question to you?
I buy a company for 100 rs with 20% leverage. Share price drops to 80rs and I buy some more and with same leverage ratio! Share price is now 60rs! What would you do? I am convinced that company is good but the market is moving opposite! A very theoretical question. Thanks in advance |
Posted By: basant
Date Posted: 21/Jan/2013 at 1:05pm
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If you see my previous post a) you should be repaying back leverage and b) if the stock price drops the leverage ratio moves over 20% so you are not to buy more shares irrespective of how good the story is. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: raz_737
Date Posted: 26/Jan/2013 at 8:47am
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Which is the best way to get the leverage? I am looking at various options from the past few days and finally decided that pledging the shares for under 16% is the best long term option.I see axis bank offering loans against securities for an interest of 12.5%. Is this the best option? I am going to leverage 20% as Basant ji suggest. Are there any loopholes or drawbacks I am missing?? |
Posted By: rajnsharma
Date Posted: 26/Jan/2013 at 9:39am
Also make sure that you leverage only to that extent where you don't have to sell to meet the pledge obligations during sudden market fall.
------------- Wall Street makes money by it's activity, while you can make money by your in-activity - Warren Buffett |
Posted By: raz_737
Date Posted: 26/Jan/2013 at 9:55am
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My leverage will be less than 20% of portfolio value and less than 50% of the pledged shares.And planning to pay back within 6-8 months through monthly income.Risk of something going wrong will be very less in this case I guess. Guys in this forum...how do you manage the funding for short term(3-12 months) leverage.Which banks or broking house offer best services in this aspect. |
Posted By: bandlab1
Date Posted: 27/Jan/2013 at 4:48pm
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if you are going to pay back thru monthly savings in 6-8 months, why not keep buying with your monthly savings ? 6-8 months is not a huge advantage for a long term investors. and market is not going to move much (in my view) in 6-8 months.
as basant-ji has already mentioned what is important is how effectively you are going to use the funds ? if you have identified a special situation where there's a huge opportunity and cant wait for 6-8 months then only consider leverage. if its for regular portfolio building, use monthly savings
my 2 cents
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Posted By: retailinvestor
Date Posted: 27/Jan/2013 at 11:32pm
| Thank you Basantji. |
Posted By: raz_737
Date Posted: 28/Jan/2013 at 6:25pm
I am looking at a special situation kind of thing and convinced that there is good chance that price will move up in 6-8 months.Even if it doesn't I am ok since its a long term position and willing to loose the interest on leverage. |
Posted By: Kautilya
Date Posted: 28/Jan/2013 at 6:41pm
If you have one or many life cover policies from LIC then you can pledge them and get loan (amount depends on how many premiums you have paid so far and the bonus accumulated) at about 10% ROI. ------------- My indecision is final. |
Posted By: kd1974
Date Posted: 29/Jan/2013 at 3:09pm
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I would prefer to avoid the leverage altogether, if possible.
You may consider buying out of money call options (NOT future) on the stock, if stock is large available in F& O. a far out of money call option cost for next month or far month will be very low compared to financing at 16%, even if you let the options expire.
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