Very important Investment tips from a veteran…
There are some very important things that you should know if you are a decent investor…even semi decent is fine….by the way…..
1. Leverage: borrowing money to do a deal. You have no clue of the time frame for which you are doing the deal, but hope to make a killing. Normally the deal, the margin, the amount of money paid…..ALL ARE LOST instantly…
2. If you do a Leverage deal you have the license to lose your bankers money. That is a huge advantage and a nice feeling to ripping your banker but if you are solvent he will recover it from you. Makes no sense.
3. If your salary per annum is Rs. 12Lakhs, your other income Rs. 4 lakhs, and assuming you have no leverage for consumption (including house), then you can leverage about Rs. 35 lakhs. Your other income will be in a position to pay the interest, and you can repay part of the loan also from salary.
4. Even a safe leverage can hurt if the asset moves in the opposite direction.
5. When you leverage, every rupee has to earn CONSTANTLY – because interest is being paid 24×7…so you dare not leave money sleeping in the savings bank account. That will hurt.
6. If you are not a diligent person who moves money from SB account to a liquid fund, pays the credit card bill exactly on the due date, and juggles credit cards to use the full 45 days credit…it is unlikely that you will benefit by a smart and safe leverage. Yes if you are very lucky you may make some money.
7. As a general rule for about 99% of the population, borrowing to invest or borrowing to lend further is a pretty stupid idea. Not because of the idea itself, but because of YOU.
Atiker
“If you are not a diligent person who moves money from SB account to a liquid fund”
NAV of Liquid fund took a beating on 16th July
I was lame enough to believe that Liquid Fund can never lose money 🙁
subra
Atiker
do not look at a black swan to say there are no white swans
Des Adams
Yes I agree with the dangers of borrowing to invest. I’ve seen so many lives ruined by taking this investment path. Many people are influenced by the amount of leverage they can get and ignore the risks.
Ravinder Makhaik
That ——-
Quoth – As a general rule for about 99% of the population, borrowing to invest or borrowing to lend further is a pretty stupid idea. Not because of the idea itself, but because of YOU. – Unquoth
—— sums up what a false notion of feeling rich (on somebody else’s money) could be about.
ssk
Realestate seem profits seem to be really big…By hard work surely this money cannot be earned. Year ago a property outside chennai villa costed 1.5Cr. A person sold it, almost 1.9Cr and made profit in less than 2 year. Realestate really gives big. Now they can go for bigger property leverage. I look like a clown keeping the money in bank. As the huge number of population yet to grow, realestate offers big leverage.
subra
Yawn SSK. Yawn.