Taking a bank loan out for Investing

This is a discussion on Taking a bank loan out for Investing within the Home Trader forums, part of the Trading Career category; Hi, I was wondering if any of you have ever taken a loan out from the bank to sport your ...

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Old May 12, 2007, 11:20pm   #1
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Taking a bank loan out for Investing

Hi, I was wondering if any of you have ever taken a loan out from the bank to sport your trading?

Let me know what you think about it and if it's a good idea.
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Old May 12, 2007, 11:43pm   #2
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As a rule of thumb the advice given with regard to investing and or trading is:

Don't use any money that you cannot comfortably afford to lose.

If you need to borrow money to invest or trade then it suggests that you are not in the best position to be able to afford to lose it.


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Old May 13, 2007, 8:36am   #3
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I would not do it.

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Old May 13, 2007, 12:37pm   #4
 
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Bullz n Bearz

Never done it. Would never think of doing it. Crazy thing to do, because you are now adding in the loan interest into the equation, thereby adding to the difficulties of making a profit and hence the risk reward ratio is weighted more and more against you.


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Old May 13, 2007, 12:50pm   #5
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Even if you were to get the loan interest free, the moral obligation of having to return the capital would put me off.

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Old May 13, 2007, 2:12pm   #6
 
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Im frantically trawling the net for an article I read in the late nineties about margin trading and brokerage accounts opened by credit cards. excellent article it was, inspiring stuff, probably lost for ever.

Ok, Im going to be a little controversial here and say why not, if a good proven strat is in place, why not have your cake and eat it. No ones going to make life changing amounts from trading unless they are doing it in reasonable size. Borrowed money allows the less well off to play big and strat willing, live the high life........now where's that damn article!

Last edited by Lightning McQueen; May 13, 2007 at 3:52pm. Reason: deleted post title
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Old May 13, 2007, 2:40pm   #7
 
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totally bonkers especially if you're trading on margin too
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Old May 13, 2007, 3:19pm   #8
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Don,

You are talking like someone who has just come on the scene, full of optimism and so sure that everything is going to go your way. I'm sure that you know that that is not so in trading.I started off in trading, already fairly comfortably off and learned, that way, how difficult it is to make a crust in this. Now, getting on in life, experience is telling me not to borrow. Credit cards screw you for 25-35% per year, unless you pay at the end of the month. It's ridiculous! My wife has a credit card, but I have never bothered, except for having a housecard with Corte Inglés. She drags hers out when when we hire a car, or go on a flight, but cash is king as far as I am concerned and borrowing to trade is, simply, not an option.

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Old May 13, 2007, 3:48pm   #9
 
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totally bonkers especially if you're trading on margin too
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Don,

You are talking like someone who has just come on the scene, full of optimism and so sure that everything is going to go your way. I'm sure that you know that that is not so in trading.I started off in trading, already fairly comfortably off and learned, that way, how difficult it is to make a crust in this. Now, getting on in life, experience is telling me not to borrow. Credit cards screw you for 25-35% per year, unless you pay at the end of the month. It's ridiculous! My wife has a credit card, but I have never bothered, except for having a housecard with Corte Inglés. She drags hers out when when we hire a car, or go on a flight, but cash is king as far as I am concerned and borrowing to trade is, simply, not an option.

Split
Hi guys

I was under the impression that the thread starter was a pro trader although on reflection the opening question is nieve, I suppose a point may be made shortly. What I will do is moderate the title of my post so as not to mislead, hows that? it it a bit strong. Im still looking for the article but I dont have high hopes of finding it, I can remember the general points, which im writing up now.
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Old May 13, 2007, 4:10pm   #10
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Don,

You are talking like someone who has just come on the scene, full of optimism and so sure that everything is going to go your way. I'm sure that you know that that is not so in trading.I started off in trading, already fairly comfortably off and learned, that way, how difficult it is to make a crust in this. Now, getting on in life, experience is telling me not to borrow. Credit cards screw you for 25-35% per year, unless you pay at the end of the month. It's ridiculous! My wife has a credit card, but I have never bothered, except for having a housecard with Corte Inglés. She drags hers out when when we hire a car, or go on a flight, but cash is king as far as I am concerned and borrowing to trade is, simply, not an option.

Split
Interesting. Yeah, the interest is a huge turn off for me.. I think i'll pass on this one.. But thanks for your ideas, guys.
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Old May 13, 2007, 4:42pm   #11
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Credit is just a form of financing a business, i personally don't think it's that crazy. Implemented into a thorough and professional business and trading plan, why not?

It's not recommended for the learning phase, definately not.
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Old May 13, 2007, 5:42pm   #12
 
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I know of at least one trader who used to frequent these boards and was well respected, Who borowed 1,000 on his credit card to finance the start of his trading career.

He hasn't looked back since.
Now he has his own trading site for forex trading and continues to grow.

BUT He had been testing his trading methodology for a very long time before going live, and stuck to his plan rigidly.

It paid off for him. But for the vast majority with not enough will power and no tested trading method in place it would not be for them.

So the answer is a big NO.

The way around this is to save up 300 pounds or so and trade with one of the sb's.
Not ideal, but the cheapest way to start.
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Old May 13, 2007, 6:22pm   #13
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I remember a mate from 20 yrs ago who bought and sold shares....moderate size purchases lets say from 1k up to maybe 5k per company he was interested in....all this activity was through the eighties after the relaxing of money supply...he did reasonably well each year...in a bull market of course....then he suddenly gets this crazy idea to borrow approx 30 k ....because his returns were making more than interest payable on the loan....he then gets it in his head that Cadburies are ripe for a takeover....absolutely insistant he was and kept piling more and more in ......of course the takeover never happened...I mean why would it !!!! his maximum holding eventually was in excess of 60 k in the One share....then 1987 happened...and he went back to work I presume to pay off the loan....

ah well ...just One little story.
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Old May 13, 2007, 6:37pm   #14
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I do not say that some have not done it. I just say that it is one hell of a risk.

I remember, a few months ago, listening to "You and Yours", a consumers' programme on BBC4 in which a person was explaining how he borrowed £4000 to buy a car. He was married and defaulted on his payments. Didn't mean to, didn't tell his wife, either, and built up a debt of hundreds of thousands of pounds, incredibly quickly.. In the end the whole thing collapsed around his ears.

Don't do it. I don't know what is worse, that, or writing naked options.

Split

The UK has a debt 0f 1.3 TRILLION POUNDS in mortgage other debt, including credit cards. Everybody borrows in some form or other, it seems to be the thing to do these days. But it is going to come back to us, later, in some form or other.

Last edited by Splitlink; May 13, 2007 at 6:45pm. Reason: Additional thought.
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Old May 13, 2007, 6:41pm   #15
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Quote:
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I do not say that some have not done it. I just say that it is one hell of a risk.

Don't do it. I don't know what is worse, that, or writing naked options.

Split
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