Wassup everybody,

I am thinking of getting into stocks well. I have a very small portfolio of around Kshs 90K currently invested in stocks.

I want to really get in stocks this time since it is the worst market we've had in 3yrs.

I currently work for an investment firm in the tech department with a net salary of 100K.

Today I approached my bank for an unsecured loan of 3M to put into this but I was only eligible for an unsecured loan of 2M i.e. based on my payslips, banking history and current savings of around 91K etc.

I was given a rate of around 20.2% interest for a period of 72months on condition I take take a credit card and my employer always deposits my salary into that specific bank only. They have different rates for different offers i.e. 20.19, 22.3 and 23.1.

Based on calculation with the bank representative, I will be making monthly payments of about Kshs 48,995 per month for the 72 months.

Total payment: Kshs 3,527,640

The bank really seems like they want to give me this loan and the bank rep was really pushing me to even fill in the forms today and wrap up the process tomorrow with the employer letters but I am really having 2nd thoughts and I am literally scared :o !!

Now my concern is this,

1. I am very jittery since this is my first ever loan. I have never taken a loan even a small one of 200 bob as hard as it may seem to believe in my life so this is the scariest thing I have ever done.

2. I just finished campus last year. My net salary is around Kshs 99K.
So from the payments this leaves me with 50K of which 21K goes into my rent, water & elec bill. Which leaves me with about 28k to spend. If I subtract 7k for transport(i.e. mat on most occasions and an occasional uber for the nights I have to be in the office till 10pm), 3k for internet and 3k for phone that leaves me with 14k for food plus additional costs i.e. entertainment.

I do not have any obligations to anybody at least in the next 7yrs but paying half of my salary is really something that is stressing me even before I take the next step.

3. I notice I have to make around 1.8m profit inclusive of 5% capital gains tax and brokerage fees to breakeven of the 1.53m loan interest from the investment.


Now my question is;

Is this a worthy venture? Has anyone done this before(i.e. taken a loan to trade? If you did, did you break even?)

The stocks I want to get into are WTK AT 180, SCAN at 18, KAPC AT 80-85, EGAD at Ksh 18-20 and TPSE(currently @Kshs 20) if it ever gets to Ksh 15 since it's election time and it is a bit scary for that. I also want to get into EQTY(at 36) and CO-OP(at Ksh 15)

Another thing I am wary of is increasing loan interest rates during the 6yr period due to inflation and the massive loans we are undertaking now as a country

Thank you for replying.

Mostly due to greed I admit. I figure the bear is here with us now for only a short while. I want to get a big piece of this pie as possible.
I figure I am young and may not be able to get this opportunity to risk such a large chunk of my income as I get older and responsibilities increase.
Most of my work mates in my pay range are driving 600-1.2m cars serviced on loans and I figure since I am not in a hurry to get a car, let me risk for a small investment.

My dream is to convert that 2m to 6m in 3yrs whilst actively trading each day.
I know this is damn hard i.e. 50% returns each year.

So if you take that loan,you wont be living but surviving

what happens incase you lose your job? Get an emergency(medical etc),schooling?

He is fresh from school and he needs to survive now.Once he has a standing order for the loan he will work harder and become more ambitious to get more disposable income.If he has a lot of money with no plans he will just waste it and not do anything productive.

He should try this
Rent and utilities-22%
Transport-7%
Internet and phone-6%
Food and entertainment-14%
Loan repayment-40%
savings for rainy day/opportunities/room for interest rate shocks-11%

Due to the greed you've just mentioned, that's why banks are posting superhuman profits. Why not invest the monthly 50k by accumulating the said shares slowly slowly. The stock market is not going anywhere. Shares will always climb and plummet. The 7yrs cycle. Better yet invest in a reputable SACCO for the said number of years and have better leverage.

Take the loan, buy stocks. Its a bear market and stocks are bound to recover in the next 2-3 years. Do not listen to the naysayers. If you buy stocks worth 3m and they rise by 50%, you will make a profit of 1.5m. less the 500k interest and you will have a clean 1m in your pocket.

The key is how choose your stocks to minimise loss (Not to maximise profits):
Pick stocks with low PE (Less than 8), history of dividends (Dividend in last 5 years), high dividend yield (at least 5%). DO NOT buy more than 3 shares! You can't watch over too many eggs.

Then sit back and enjoy the fruits of leverage.

Thanks for the advise but I am usually against saccos since I find them to be more expensive that banks. I may be wrong but here is my reasoning.

They basically tell you save x amount and then they give you a loan of upto 3times you savings. Which just means that they give you 2/3 of what you want since 1/3 is your money and apply the interest of 12% on 3/3 of the cash.

I am not going the land route since perhaps I am too chicken.

Why? I have no idea how not to get ripped off with all this fake titles going around. Then I find there is the lie in the now popular 1/8th an acre.

Even then, I really don't want to buy land that I do not have money to develop i.e. fence, pay land rates, I do not know anything about farming and surely that will not leave me with cash to even erect 2 apartments

My plan is to build the cash from the loan and buy a 1/8th when I get to 26 where I plan to settle when I get family at 30 I estimate. By then I will be disciplined enough as an investor to plan for a house wisely and hopefully not come back here with another question of a loan