Borrowing money in the hope of making money is a precarious business. Unless you are a savvy investor, in which case you should have substantial investment funds as of now, and you wouldn’t need to borrow money. If you are an inexperienced investor, with no proven success record, then it is clear that you are taking a personal loan to gamble.
When it comes to investment, no one has ever got it right all the time, even with the legends such as Warren Buffet. The game of investment is hard, filled with risks, and you will probably get it wrong many times than you get it right. One of the most common ways people borrow money to make money is to take a personal loan to finance a business. Whereas this is a brave move, it still dotted with potential risks. If you borrow money to start a new business and it fails, you will be left with lots of debts to pay, starting with the apparent loan debt.
Despite the countless scenarios that point out that things might go wrong when you borrow money to make money, it is possible to do it successfully. You can service the borrowed money with the profits earned from investing the same amount of money you borrowed. If it goes right, you will merely “earn” several grand or even a million, but you should be ready to embrace the associated risks.
Investing Borrowed Money
The “safest” way to invest borrowed money is probably by owning a property, such as land, buildings, parking lots, real estate, and so on. This way, you can earn passive income, plus the values can increase with time. The best of all, you rent parts of the property tax-free and sell it at a profit. An alternative way of making money with your borrowed money is by investing it in the stock market, known in the investment world as gearing or merely leverage in English.
Gearing is not for the twitchy ones though, you need to know what you are doing, that way, and you will be minimizing the risks. Nearly anyone can adopt this tactic and make hundreds of thousands in a year, and that is why the probabilities of making profits are high with gearing.
With gearing, the profits you make are directly related to the risks you are ready to take. It also doesn’t require any extraordinary investment skills, and even someone with little or no initial cash outlay can gain successes with this method.
If you are new in the investment game, start with a small amount of money. Ensure the amount you invest is so tiny that you can afford to lose. It is a learning process, so make sure you learn as you go. Build up your capital as well as your portfolio slowly from your earnings. If things go well, you have an increasing amount of money for more significant investments. But if this fails, you will not feel the punch as you will only lose the original small amount you put in. Also, you will not be left with huge debts to repay. The critical advice here is starting low and build slowly.
But if you are a pro and you find an opportunity that can earn you good money, then taking a personal loan from Bugis Credit make more money is not a bad idea. But the opportunity needs to be profitable enough to cover the loan costs as well as inflation. As an experienced investor, you should have a perfect backup plan in case things go wrong.
How to Make Money Using Borrowed Money
Know your strength in taking risk
This is a significant first thing to consider before putting in borrowed money, are you risk averse enough? Sometimes age may play a role in determining the amount of risk a person is willing to take. For example, an old person who is nearing retirement may have little opportunities to recover the loss, while a younger investor, with the whole life in front, may be willing to take huge risks because they have plenty of time to recover the loss.
Understand the loan cost
What is the loan interest rate? What is the monthly installment? What about the penalty for late payment? Ask yourself all these questions before deciding to take the loan. Also, you need to be sure that the investment will be able to cover the costs of the loan altogether.
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Consider monthly installments
If you are sure the investment you want to make will work, you will be able to service the loan using the money earned from the venture. But if the investment is long-term, ensure that you have other means of covering the periodic cost of the loan, at least until your investment starts paying off.
Research about investment performance
We are not suggesting you go full blown analytic, but just sufficient but straightforward homework about the investment you want to make. This is helpful even though history in investment world usually don’t guarantee future success. Study everything carefully before putting your money in.
After all, nobody said it is going to be super easy. Otherwise, the world would be packed to the brim with millionaires. When it comes to investing in shares, timing is crucial but don’t get overwhelmed or scared because as stated previously, even gurus get it wrong and end up losing millions. But then again, with the experts, they usually have diversified portfolios such that if one or two underperform, they recover using the rest of the performing investments.
In your case, if you are borrowing money to invest, you are not going to have the luxury of the different portfolio as you will be only dealing with one or two investment markets or shares.
If you want to make money out of the borrowed money, you need to be aware of the risk. You also need to have a proper contingency plan in place in the event of a loss — progress with extreme caution.