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"Investing With Borrowed Money: Tips and Tricks"

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It's a common knowledge that the best way to accumulate wealth is to have a solid investment. However, the irony is, to start investing, we first need to have the cash itself, creating all sorts of problems in starting it.

Thus, many people are tempted to start investing using money from personal loans, and the common questions also arise: can we actually make money by investing through loans?

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Technically, using money from loans to invest can still generate profits, and it does have its own pros and cons. Here are some things you might want to consider before starting an investment using personal loan:

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1. Calculate Whether It's Profitable

Although this is very basic, many people failed to calculate the profitability of investing through loans properly. Here is how you do it: Check out the interest rate of your loan and convert it to APR (Annual Percentage Rate) and check out the average return rate of your investment prospect.

If the loan's APR is more than half of the investment's return rate, generally it's not a worthwhile investment, even worse if they are close to each other.

2. Your Liquidity

One other thing you'll need to consider is that you'll need to be able to afford the loan payments while you are waiting for the investment to bloom. When not managed correctly, this condition can create all sorts of trouble, and it will be more complicated if there are other debts you're currently paying, such as mortgage, credit card debt, or student loan.

Make sure your liquidity and loan payments are manageable while you're waiting for the investment, especially if you're taking a long-term approach.

3. Build Emergency Fund First

Building a sufficient emergency fund is necessary before you make any investment, and even more when you are going to invest with borrowed money. After all, no matter how safe the investment opportunity is, it will still involve some kind of risks one way or another.

Nothing is worse than not being able to pay for your personal and family expenses because you lose it all in an investment, and still have to pay for the loans on top of it.

In general, build at least three to six months expenses worth of emergency funds.

4. Do Your Research

Jumping into the stock market investments without knowing what you're doing is not a good idea, and it can lead to insurmountable stress when done with borrowed money. Learn how to look at a stock's performance not only for the last few months, but since its inception date, and learn what the data will mean for the future.

The stock market can change instantly, and it can be a roller coaster ride. Doing your research first will also prepare your mental state to tackle the situation better.

So, to answer the big question: Would investing with borrowed money be a good idea? Yes, it could be! But make sure you do your homework, assess your risk, your profitability, and most importantly, be prepared both mentally and financially.