@young your ignorance appals me.fyi people take loans for different reasons-for school fees,buy consumer goods,holidays. now why not take a loan to invest in shares? A person in the know will tell you that shares are an asset class just like real property,but more risky. The main considerations are risk and the return on investment. Right now,if i had the means i would take a 1 year loan and invest in safcom,bat & co.op equally. I assure you that in the next one year this portifolio will outperform any return on property. The question is,will the returns compensate me well enough for the risks taken? Why do you think centum wants to raise a bond to invest? A bond is also debt man,Wisen up!

@Young: 'AMEN' to that! In fact I go a step further and advice anyone willing to listen that they should never put essential money in the stock market!!

E.g. You have saved 500k for a buying a house. Then your broker tells you that SCOM will hit 5-bob by year end....so you put your 500k @3.80...hoping to walk away with 650k in January....big mistake. There is absolutely no certainty that it will go to 5-bob. The probability that it will go to 5 is equal to that it will drop to 3-bob!!!

Essential money belongs in your savings account...keep it there and look for a house,then use it as a down payment......

For the stock market; you only put put money that you can afford to lose!

And to take a loan to buy stocks? That is just reckless!!

Behind the gardens...Behind the wall...Under the tree (Including: Red...Dark Blue...Yellow)

But @MainaT,I doubt if anybody buys a personal car [not commercial car] hoping to make a profit out of it.....on the other hand,I doubt that anybody buys shares hoping to make a loss!!!

The catch is in what you are HOPING for.

Behind the gardens...Behind the wall...Under the tree (Including: Red...Dark Blue...Yellow)

@ sparkly
Let assume i bought shares in 2007 bbk @ 77 per 1000 shares.I took a loan of 80k we are in the 3rd year now and am yet to realise any return on my investment actually am sitting on a loss of 25% plus the interest on loan of 16 %.It means i should not have taken the loan coz i would have made loss.


NAMASTE !Don't be unrealistic with your expectations

@ Agra. I appreciate you concerns,but yours is an overly simplistic example.



You could make a loss whether the money came from your savings,from the bank or from the lottery.



You could as well have:



· bought BAT when it lingered around 128 – 130 with that same loan in February/ March this year,

· collected about SH 15 per share in dividend up to September

· liquidated the shares in October at SH 176.



That amounts to a dividend yield of about 12% on your investment (25% annualized since you liquidate your shares in 6 months or so). Capital gains of 54%.



Your cost would be the loan interest at 16% reducing balance!



I wonder which other class of asset would have realized this kind of return? This is just an example. Many other shares performed similarly in the same period.



Investing your money (savings or borrowings) in stocks or anywhere else must not be taken as an hobby,otherwise it will turn out to be a very expensive one.



You must exercise the well known principles of investing if you choose to invest. For shares you must:



· Do your research or seek professional help

· Establish your risk tolerance level

· Build a diversified portfolio to manage risk

· Re-invest your returns for compound growth

· Match your financing to the expected returns

· Most importantly know when to take your profits,dollar average or take a loss.



I will accept the wisdom of anyone who thinks otherwise,with good reasons



@ cleokip. I agree with your analysis,in addition the loan should be considered as capital. The loan will be repaid in one year,If one invested the capital wisely (taking care to avoid erosion by the principles above),the returns on investment can be reinvested long after the loan is repaid.