Japaul Oil

[biyi oshinaga]

i agree with you, if you dot borrow money for stocks, then what else?. but i dont advise you borrow money for ipo. play your game from the secondary market.

[pumping]

Lesson number 2. Do not listen when others ask you to borrow funds to trade in the stock market

wanaj0, Biyi, That was just on a lighter mood. If you're game to borrow for trading it's all good to me. I won't do it. I think you should trade with only what you can afford to lose which typically is what you already have.

[wanaj0]

Originally Posted by pumping

Lesson number 2. Do not listen when others ask you to borrow funds to trade in the stock market

wanaj0, Biyi, That was just on a lighter mood. If you're game to borrow for trading it's all good to me. I won't do it. I think you should trade with only what you can afford to lose which typically is what you already have.

There is no money that I can afford to LOSE!!!!!

That said, as a beginner don't start with borrowed money. Get use to the market with your own money until you have some confidence.

Now when you borrow, watch the interest rate and the payback terms. I can collect a loan of N100m once the return is in 3years time and I don't have to be paying monthly. That way I can structure my portfolio in such a way that there will not be panic selling.

Those that make it big in the capital market got to use borrowed funds. That is the power of leverage. You however need to 'know' how to use it so as not to backfire on you.

[hispy99]

Originally Posted by wanaj0

There is no money that I can afford to LOSE!!!!!

That said, as a beginner don't start with borrowed money. Get use to the market with your own money until you have some confidence.

Now when you borrow, watch the interest rate and the payback terms. I can collect a loan of N100m once the return is in 3years time and I don't have to be paying monthly. That way I can structure my portfolio in such a way that there will not be panic selling.

Those that make it big in the capital market got to use borrowed funds. That is the power of leverage. You however need to 'know' how to use it so as not to backfire on you.

I have no problem with borrowing; but i understand Pumping's perspective. Leverage should not be treated lightly. As much as we feel that we can select "winner" stocks, things can go horribly wrong (Cadbury, ENRON). If they do, then leverage compounds your problem; you lose on your investments and then you are on the hook for interest. Many hedge funds have imploded due to leverage and a perfect example is Long Term Capital Management.

My own personal motto for stock investing is "do not put chop money inside the stock market".

[MR. CEE]

Originally Posted by Yusuf

I will advise you go ahead and request for 500,000 units. Who knows. you may be lucky to be given.

Risk is the name of the game. If you were not given, your money will be refunded back to you. But the snag there is that it is not worth it if the source of the fund is a bank loan as you will have to pay interest on refunded money if you are not allocated all the units you requested for.

I will confirm more on it later and let you have more fact.

Does anyone have access to Japaul PO form please attach it so that the house can benefit.

[hispy99]

Originally Posted by wanaj0

There is no money that I can afford to LOSE!!!!!

That said, as a beginner don't start with borrowed money. Get use to the market with your own money until you have some confidence.

Now when you borrow, watch the interest rate and the payback terms. I can collect a loan of N100m once the return is in 3years time and I don't have to be paying monthly. That way I can structure my portfolio in such a way that there will not be panic selling.

Those that make it big in the capital market got to use borrowed funds. That is the power of leverage. You however need to 'know' how to use it so as not to backfire on you.

Originally Posted by MR. CEE

Does anyone have access to Japaul PO form please attach it so that the house can benefit.

http://www.japaulplc.com/Prospectus4Web.pdf

[pumping]

Originally Posted by wanaj0

There is no money that I can afford to LOSE!!!!!

That said, as a beginner don't start with borrowed money. Get use to the market with your own money until you have some confidence.

Now when you borrow, watch the interest rate and the payback terms. I can collect a loan of N100m once the return is in 3years time and I don't have to be paying monthly. That way I can structure my portfolio in such a way that there will not be panic selling.

Those that make it big in the capital market got to use borrowed funds. That is the power of leverage. You however need to 'know' how to use it so as not to backfire on you.

I'm quite surprised by your analysis. If you borrow 100 Million and don't have to pay anything for 3 years, what happens at the end of 3 years if your capital is now 75 million due to losses...? Ok, tell me you can't lose. I hear you.
You cannot prevent the stockmarket from backfiring. You don't have that sort of control.
You can afford to lose money that belongs to YOU but you cannot afford to lose money if it belongs to ME or somebody else.
Those that make it big in the capital market don't use borrowed funds. Where did you get this information from? In most countries abroad you cannot borrow money to trade in stocks. It is considered unethical and downright illegal in some countries. Yes, you can borrow against stocks that you own but then this is like dropping collateral. Leveraging is a diffferent ball game. Even here you are advised to expose yourself only to the point that you can repay without resorting to borrowing.

[hispy99]

Originally Posted by pumping

I'm quite surprised by your analysis. If you borrow 100 Million and don't have to pay anything for 3 years, what happens at the end of 3 years if your capital is now 75 million due to losses...? Ok, tell me you can't lose. I hear you.
You cannot prevent the stockmarket from backfiring. You don't have that sort of control.
You can afford to lose money that belongs to YOU but you cannot afford to lose money if it belongs to ME or somebody else.
Those that make it big in the capital market don't use borrowed funds. Where did you get this information from? In most countries abroad you cannot borrow money to trade in stocks. It is considered unethical and downright illegal in some countries. Yes, you can borrow against stocks that you own but then this is like dropping collateral. Leveraging is a diffferent ball game. Even here you are advised to expose yourself only to the point that you can repay without resorting to borrowing.

Yes, you can borrow to trade in stocks. I can walk to my bank and take a personal loan if I want to. I do not see my bank having a problem if I decide to trade in stocks with the money. As long as it's a personal loan, you should be able to do whatever you want to with it.

[chidianosike]

Folks,

The last few contributions have been very educative. Real life stuations have seen people get carried away and invest 'Chop money' in the market and then God forbid, it goes wrong...the rest is history.

To that i'll say the 3rd rule should be 'Dont invest Chop Money'. Chop money ranges from money set aside for rent, school fees ...etc.

Its no joke..people make these mistakes.
This discussion should not discourage anybody but rather make us all alert to the responsibillity that goes with decsisions we make with our investments in the stock market ( from stocks we buy to source of our funds) I personally think a loan is a Big Gamble and is not for the faint hearted.

Guys shine ur eyes...

I love this forum, we've got each others backs'.

Thanks to the contributors..

[biyi oshinaga]

that might be your idea, but how far can we go with our own money?, we need other people's money to grow. it wasnt funy when i started, but with strategic moves with borrowed funds, i hit it big in this market. for you bold hearted, i wish you good luck.

[Yusuf]

Using borrowed money to leverage on stock can be good and also can turn out to be bad. It can be good for a stock like Dangote Sugar which will make the benefactors to always think of doing more like drug pushers. It can be bad if it is going the way of FBN currently. You can imagine what will be going on in the mind of people who borrowed money to buy PO of FBN. The stock is at N36 when even the certificate has not been released.

You have to look very well before you leap. For JJC/new comers, I will advise that they should not start with borrowed money and the so call chop money. This can be very very heart breaking when you see your worth been eroded by Bear on the floor. This can lead to panic offloading which is very common with uninformed investors. Please start with money you thing you can loose without anybody noticing it on your face while you learn more on the rudiment of the game before going for borrowed fund.

One of the rules my mentor thought me was to start investing with money I can afford to lose.

[pumping]

Originally Posted by hispy99

Yes, you can borrow to trade in stocks. I can walk to my bank and take a personal loan if I want to. I do not see my bank having a problem if I decide to trade in stocks with the money. As long as it's a personal loan, you should be able to do whatever you want to with it.

I don't know where the bank you are referring to is. Nigeria or abroad. My post mentioned foreign banks but let me present the scenario for Nigeria and abroad.
Nigeria: You can borrow money to do whatever you like. Marrying a second wife or taking a chieftaincy title are good enough reasons.
Western Economies: You must state your purpose of borrowing even if it is a personal loan. It does not matter if you want to use it for travel or to buy a car or home improvement. This can be okay but you cannot state that you want to use the money to trade in stocks. If you decide to use your "personal" loan to trade in stocks there is nothing the bank can do at that stage.

[pumping]

Originally Posted by biyi oshinaga

that might be your idea, but how far can we go with our own money?, we need other people's money to grow. it wasnt funy when i started, but with strategic moves with borrowed funds, i hit it big in this market. for you bold hearted, i wish you good luck.

Yes, you borrowed and made it big. This is cool and I commend you. However, the point being made here is that not everybody will make it the way you did. You can borrow money for trading but it makes sense to borrow what you can pay back outside the stock market if the stock market turns against you.

People borrow money to stake on horses or football games and some make it big. Does that make it a good idea to borrow money for such activities...?

[chidianosike]

Thats d point Pumping,
for anyone who has hit it with borrowed funds there is another one or more person(s) that has been burnt.

looking at the big picture Biyi,

I think it boils down to the individual, how much appetite for risk he or she has got and he's abillity to recover from that effects of that policy if it boomarangs.

Come to think of it, can anyone of we 'value hunters' say for certain that he's projections for price adjustments on stocks have worked out 100% according to plan taking 2006/2007 as a case study? No matter how long we've chewed on the fundamentals and considered investor sentiments. There is always that unseen hand in our NSE that causes an element of suprise. Can i call it providence
The suprise can range from better profit taking than we anticipated, a longer time to wait than we anticipated, or the share prices begin to slide If the Bears take control (like we are seeing now). So the question is, would u rather have borrowed funds in the party when the 'Bears' come calling?

Let me add my disclaimer

Views expressed are personal please..lol...

[chidianosike]

Thats d point Pumping,
for anyone who has hit it with borrowed funds there is another one or more person(s) that has been burnt.

looking at the big picture Biyi,

I think it boils down to the individual, how much appetite for risk he or she has got and he's abillity to recover from the effects of that policy if it boomarangs.

Come to think of it, can anyone of we 'value hunters' say for certain that he's projections for price adjustments on stocks have worked out 100% according to plan taking 2006/2007 as a case study? No matter how long we've chewed on the fundamentals and considered investor sentiments. There is always that unseen hand in our NSE that causes an element of suprise. Can i call it providence
The suprise can range from better profit taking than we anticipated, a longer time to wait than we anticipated, or the share prices begin to slide If the Bears take control (like we are seeing now). So the question is, would u rather have borrowed funds in the party when the 'Bears' come calling?

Let me add my disclaimer

Views expressed are personal please..lol...