Starting Investment With A Loan

Starting Investment With A Loan

July 07, 2020
stock broker

It is very important to go through your monthly expenses before start doing investment and paying back your loan or a credit card debt belongs to your expenses. It has risks to do investment with a loan and in this page we will go through the basics to understand where lays the risk.

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Any loan bigger or smaller has one common thing the money is not yours and you need to return it one day. The same goes with a credit card debt even many people taking it as part of their monthly income or a money that belongs to them.

What should you do when you do own a loan, should you start buying shares online or not?

It’s clearly depends on your financial situation and the loan. We do recommend to be very careful with your decision. The stock market can be very tricky and it is possible that you can lose your money. You need to understand if you could afford losing it and if you do how it will affect you and your family financially. For example take a piece of paper and write down your current financial status in numbers. Play through a bad stock market situation and you’d have lost all of it. What does happen next and how would you come out of the situation? This would be your “fire exit” plan.

Stock broker says: if you own a small loan or a credit card debt then it does make sense to return them before starting to buy shares. The loan and the credit card interests are usually between 11% and 30% and not having so much experience in stock marketing you wouldn’t make so high returns. We do suggest to wait a bit more until the loan or the credit card debt is returned and meanwhile start to practice buying stock on a notebook or using a stock market online game. For example one of them is Halifax Fantasy Trader Game.

What about the mortgage? It is usually taken for many years and nobody wouldn’t be able to wait so long before to start buying shares. Stock broker warns you to be VERY careful with your decisions and especially how much money to invest. You need also to keep a BIG emergency budget. It should be over 60% of your yearly mortgage returning amount. If your budget drops under this then you should stop buying more shares and you should start to take your money out from the stock market. Of course when the time is correct unless it is already an emergency.

You should not buy shares when you have money problems, because this will affect your decisions and this way you may end up loosing money. You should ideally return the loan and your credit card debt before buying any share.

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