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Thinking of getting a credit card to buy some shares..

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Super Contributor
I know you will probably say its ''against the rules'' however it takes so much time for me to build up a sizable stake in a company month upon month by making deposits of any excess cash. So I thought to myself, why not take out a credit card, get a nice lump sum investment in some stock and pay more than the minimum payment required. Obviously the interest rate will be higher but at least I would have locked in a chunk of shares for longer than I would have to repay the actual credit card...Please advise...
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38 REPLIES 38
Not applicable
These are the questions I would ask myself given the scenario you mention : Is the current bull run (post 2007/8 - average length of bull markets is 5 years) a little advanced to be using a credit card to buy shares? Are we not at the bottom of an interest rate cycle? (How will you cope with repayments if rates rise?) How secure is the income stream that must pay the credit card debt? Good luck with your decision.
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guru
Contributor
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guru
Contributor
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guru
Contributor
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Super Contributor
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Super Contributor
cfd's are not an option for me, the risk as far as i know is much higher...I just need a way to raise large sums of capital fast in order to make purchases that have impact...
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Super Contributor
Thanks, food for thought...its just really frustrating having to put away small sums each month...
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Not applicable
Start an investment club with a few friends/family members. You should not buy shares on credit.
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Not applicable
Start an investment club with a few friends/family members. You should not buy shares on credit.
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Not applicable
Start an investment club with a few friends/family members. You should not buy shares on credit.
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Not applicable
You worry about the risk of trading Cfd's... at least you can close a losing trade. What will you do about a maxed out c.card and falling stock prices?
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Highlighted
Valued Contributor
short answer is no .. long answer is can you fund the credit card (including with higher rates) and will you panic and sell if your shares go south, coz then you just get left with a hole .. do you buy quality or hopefulls, later way dangerous
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Super Contributor
Have you considered approaching ABIL for a loan. Interest rates are exorbitant - but you'll probably never have to pay it back.
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Not applicable
firstly, a credit card can get you what - R20k-R80k? Not enough for a leveraged position. Secondly, have you ever noticed that it is almost impossible to find the credit card interest rates on a bank's website? They are quick to advertise homeloan rates, but not CC's. So you can deduce that you are paying around prime + 5% compounded daily. That is an effective interest rate of 14,4% per annum. You share will have to outperform that (plus transaction costs) just to break even. So you will be maxed out, stressed, with a touch and go profit proposition, and worse case scenario, when you have made your return, the proceeds hardly made the whole endeavor worth while. Take some of Buffet's advice here - patience, my padewan. Rather save your monthlies, wait for the inevitable pullback, and buy with a lumpsum.
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JTee
New Contributor
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Super Contributor
Mr. S......you are basing your decision on being confident that you will make a profit.....but the long and short , you could also loose. if you really want to borrow , then maybe the home- loan is better, if you have one.....Remember always factor in the potential loss....but I have 2 rules....rule 1:never borrow to be in stocks, and rule2: if you want to be in stocks, always follow rule 1!
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Frequent Contributor
It is not a feasible option at all could take you 6-years to double your initial investment. Laying down R20k - R80k is a far to small amount and you could not afford to take a knock whereas a far larger sum R3mill - R5mill helps you to diversify and ride out the market crashes along the way.
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Super Contributor
I think it depends on how long you have been trading and investing in the stock market, it took me four years before I started to show proper profits, calculated on a yearly basis, my investment then was much smaller then now and I now regarded those losses as "school fees". Can you afford the "school fees" ?
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Super Contributor
MrS. There is just no true short cut to invest in shares and make money if you don't have money. Forget using a credit card and forget trying to build a sizable stake in an individual share in a hurry with somebody elses money. Chances are you gonna get burnt. I would suggest you start and assume you are already - invest on a monthly basis in something like a Satrix ETF (and there are quite a few similar from various companies) and keep on to read,read read and you will learn,learn, learn!. Good Luck and you eventually will make money this way.
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