Borrowing money to invest in securities - a popular form of business today, but in order to maximize profits and limit risks, you need to pay attention to the following issues.
Stocks and shares are currently quite popular forms of investment today. Therefore, many people are intending to borrow money to invest in securities , borrow money to buy stocks to make profits. However, what is a loan to buy securities , where to lend, should you borrow and what should you pay attention to when borrowing? All will be presented by CashBerry in this article.
Borrowing money to invest in securities and stocks is a form of borrowing money at commercial banks to meet the financial needs of individual customers for investment capital for securities and stock trading.
The stock market is growing, leading to an increasing demand for capital for investment. Therefore, banks are supporting customers with a variety of loan product packages for business in the field of stocks and securities, along with attractive incentives.
So, what are the benefits of borrowing to invest in stocks and shares that are so interested by many people?
For the market:
● Provide flexible capital flow to the market.
● Create an environment to attract foreign investors.
● Play a fundamental role in converting stocks to the official market.
● Promote the development of the OTC market (decentralized market).
● Diversify loan categories.
● Contribute to increase income.
● Build credibility with customers.
From March 15, 2017, credit institutions started implementing new regulations on lending for securities business based on two newly issued circulars, including Circular No. 39/2016/TT-NHNN regulating business activities. lending activities of credit institutions, foreign bank branches to customers and Circular No. 43/2016/TT-NHNN regulating consumer lending of financial companies.
Accordingly, Circular 39 stipulates that customers who want to apply for loans must be legal entities or individuals, so non-legal entities (households, other organizations without legal status) are not sufficient. qualified to take out a loan.
Circular No. 36/2014/TT-NHNN on conditions and limits on credit granting for investment and trading in stocks stipulates that commercial banks and foreign bank branches are only allowed to grant credit for a limited period of time. no more than 1 year in the form of loans and valuable papers discount. A commercial bank may not provide capital to a subsidiary or company associated with a commercial bank so that such company can lend credit to a third person or organization.
Conditions for granting credit to invest and trade in stocks:
● Ensure funding is always within safe limits and ratios.
● Must have a bad debt ratio of less than 3%.
● Legal entities that want to borrow credit must fully comply with regulations on risk management and have a reserve fund for risks.
Decree 32/2017/ND-CP on State investment credit stated:
- The borrower's investment project must be on the list of projects eligible for investment credit loans issued by the State.
- Not to enjoy credit incentives from other financial institutions and the State at the same time.
Each bank will have a certain interest rate applied to each customer's loan, but not exceeding 27%/year .
Below are the reference interest rates of some banks that are lending money for securities investment .
● Sacombank supports loans for securities and stock trading with maximum flexibility, applied at the interest rate of 7.49% . Maximum loan term is up to 5 years.
● Eximbank supports lending capital for securities and stock trading with a maximum loan of up to 100% of the value of securities and shares sold by customers and is applied at an interest rate of 8% . The loan term is flexible according to the needs and financial capacity of the customer.
● ABBank supports lending capital for securities and stock trading with a maximum loan of 50% of market value, applied at an interest rate of 7.79% . Maximum loan term is up to 1 year.
● SHB Bank supports loans for securities and stock trading with the maximum loan for each specific period, applied at the interest rate of 5% . Maximum loan term is up to 1 year.
● Dong A Bank supports loans for securities and stock trading with a flexible maximum loan, applied at an interest rate of 9% . Maximum loan term is up to 1 year.
● OCB Bank supports loans for securities and stock trading with a maximum loan of up to 95% of the value of securities traded and is applied at an interest rate of 5.99% . Flexible loan term.
Although the form of investment in stocks and shares is supported by many banks for loans, whether or not to borrow money to play stocks or buy stocks needs to be carefully considered.
In the principle of stock investment, there is a line that any investor must consider, that is borrowing money to buy stocks .
You might immediately think of using leverage to buy stocks, but that's a different story, because securities companies never lend you money if they're not sure you can. pay. You have to have something to assure the bank that gives you the money that you will pay if you take the risk, and that is usually your own investment.
Here, borrowing money to invest is when you borrow some money to buy stocks. In other words, if you lose, you won't be able to pay, or go bankrupt.
Legendary investor Warren Buffet used to talk a lot and give advice on borrowing money to buy stocks . As an investor who specializes in long-term stocks, he offers insightful advice on this: "It's simply impossible to predict how far a stock might fall in a short period of time. Even if you only borrow a small amount and your investment has not been affected by the market drop, you will panic because of headlines and articles. right decision" .
The saying of "the sage of Omaha" most truthfully reflects the psychology of an investor who uses borrowed money to buy stocks. When you borrow money, you will be anxious to earn high interest in a short time to quickly repay the debt. He will be born in a hurry, the pressure he creates will cause him to make wrong decisions, unreasonable exits. The stress of a debtor will be the sickle of death that knocks out an investment career.
The above is the information that helps you to consider borrowing money to invest in securities so that it is reasonable. This is a form of investment with high returns, but there are many potential risks. Therefore, think carefully before deciding to enter this market.