VR Logo

Taking loan to invest in mutual funds

Taking loan for investment is not at all a wise decision

I am an NRE and wish to invest Rs 25 lakh in mutual fund in India which I will take as a personal loan at the reducing interest rate of 10%. Kindly advice on which sector is better to invest the fund, including its locking period and taxation. I plan to invest with a horizon of 3-15 years.
-Abdul Gafoor. P.H

We strongly urge you to stay away from investing with borrowed money. It is a sure shot recipe of financial disaster. Many people get lured by the charm of earning quick bucks through leveraged investing. But nothing can be more dangerous than that. Equity markets do not move in a linear fashion. Prolonged bear phases, which are not rare in stock markets, can erode much of the value of your debt thus landing you in a financial mess.

Therefore, abandon this idea and invest your own money in funds gradually. You should choose 2-3 good diversified equity funds and start investing in them systematically. That's a surer way to accumulate wealth. These funds do not have any lock-in and become tax free after a holding period of one year. You can get more information on the taxation of mutual funds here.

Post Your Query