Do you use leverage/margin loan to buy shares? If not, why not?

POSTED BY randomguy ON January 4, 2011 8:39 am ONE COMMENT

Most of us would take a huge loan to buy a house and often seen as the “right and sensible” thing to do. Why do investors shy away from using margin loan to buy shares-they are assets anyway and more liquid!! I understand that the interest rates are quite high in India and one may not get higher returns to justify using margin loan.

I am overseas and the margin loan rates are quite low and I am making full use of it. It is not hard to find companies paying higher dividends than margin lending rates and when the $ get stronger I send money to India to invest directly in shares. I leverage to only 30% though – I need to have a good sleep at night.

I am just interested in knowing how many investors actually use margin loan in India.

Thanks in advance

 

One reply on this article “Do you use leverage/margin loan to buy shares? If not, why not?”

  1. Sohil says:
    January 25, 2011 at 5:56 pm

    Comparing wrong.

    Buying home on loan can be said taking loan against an asset(home rates hardly goes down it 95% times appreciates from any point you buy).For shares it cant be said same or i wont count is as asset.Suppose relaince shares from 40 rupee touches 4000 rupee and you buy at 4000 can you guarantee in a year it will be more than 4k?For home its always their base price of your buying also giving on rent you can reduce your base price.

    As you get cheaper loan yes i agree some people do practice the same so do FII but its not everyone’s cup of tea.My personal thinking.

    Reply

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