Is it time to borrow to invest?
13 October 2008
When you are starting out in stock market investment, creating a diverse portfolio can be difficult without much capital. This is why many people choose to borrow to invest so that they may begin buying shares on a larger scale. Obviously this puts more than just invested finances at risk, but it can help knowledgeable individuals to establish themselves in the stock market with a stable portfolio to build from.
As the official cash rate has been cut recently by the RBA to 6%, many people may begin considering borrowing to invest. While the market has recently seemed almost obsessed with selling shares, the temptation can be powerful to start buying shares while they are low before a market recovery sees them out of reach again.
Many reforms and rescue packages may have been announced by various governments over the past few weeks, but the stock market is still quite unpredictable. Predictions of stock market activity have seemingly gone from activity over months to day to day predictions, as massive financial and political events take their toll on the stock market. This means that anyone who is considering borrowing to start investing in shares that would normally be quite high in value while they are low should be extremely careful not to overextend their finances. It is also important not to have expectations of quick returns and choosing a stock broker who can provide advice on the likely possibilities of activity on the stock market could be extremely helpful for those with limited stock market knowledge.
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