Should I borrow money to invest in stock market?

Should I borrow money to invest in stock market? Actually, the concept is the same as borrow money to buy car or house. Just that car and house is a must for our daily life and not stock. Most of us cannot afford to buy car and house in cash. And need to borrow from bank with interest changes. Same apply to share margin financing. With proper finance management, borrow money to invest in stock market does bring more revenue.

I am using Public Bank Online Share Trading with Share Margin Financing account. The minimum amount to borrow is RM50k (last time is RM100k) and with BLR – 1.8% (around 3.8% based on current BLR) per annum interest rate. Public Bank will borrow you 1.5X money based on what you have in that account ~ cash or stock value. For example, if you have RM100k cash there, you can borrow up to RM150k margin to invest. So total up as RM250k. Same apply to stock value. However, the stock value is determined by bank and not the market value. Some of the stocks do not have such value and bank does not want to take risk to lend you too much money. And if you are not able to pay back the loan, bank can force sell your stock.

Choosing the correct stock to invest is important. You don’t want to invest on a stock have only 2% dividends and without any capital gain at all. Then you need to pay 3.8% to bank. End up you are losing money at 1.8%. So make sure you pick the high dividend yield stock to invest.

Timing is another factor. With economy getting better and in the recovery road, having more money to invest is a nice move. You can easily earn more than 100% during this time. Why? Most of the stocks are undervalue and at a very attractive price. Some stocks can even go up to 300%. Therefore, you can earn a lot more with this extra money.

Borrow money == Make more money

  • Not an option for me at this moment.
    Since you are making rm2k plus per month from Internet, this extra income shall be enough for your investment purpose.

    • Agree with Marco, I think you can use your extra income to invest. Unless you want to buy 10 biji Tanjong, then different story 🙂

  • In my point of view..if I were u,I will only invest the money I own in my bank account instead of borrowing from bank.

    Coz stock market is hard to predict,anything can happen beyond your control.
    You have to think carefully about this matter.. 🙂

    • No risk == no gain. That’s why I only use margin to buy high dividend yield stock. I already got more than 20% return with only 1% interest charges.

      • wow..20% return with only 1% interest charges,that’s good!!
        I wish I as intelligent as you… 🙂

  • I think borrow money to buy stock in current bull market is a bit risky because if suddenly the market turns bear, you may lose more than what you have.

    On the other hand, borrowing money to buy stock during bear market has lower risk because at this time, most stocks are under value.

    I heard someone who borrowed money to buy high DY stocks (REITs) during bear markets made him earn more than 20% yearly for dividend only and capital gain is even much more.

    Just my 2 cents 🙂

    Anyway your 20% return is pretty good. Is it on capital gain? What counter is it?

    • 20% return is really small compare to others because I entered the stock market lately. It is from counters like Mudajaya, Tanjong… Too bad that I sold Mudajaya so early, else more than 150% already by now. 🙂

      • One broker told me that Mudajaya will go up to RM7.00……
        I am not going to buy, but will see if this really happen.

  • I have same opinion with edwin- invest what I have only. Thinking of borrowing for invest before too but lastly give up too. 🙂