I am seeing a very wrong trend amoung youngsters, they are becoming lazy and trying to find a money glitch. It seems like they feel there is a money glitch but it's not there. If it would have been their everyone would try that. When I asked a guy about it, he was like that he can generate Alpha on the loan amount and thus he can earn enough money.
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His thought process is simple, take a personal loan for 10.5% and then invest in equity and get 14% returns and thus he can generate that 3.5% Alpha and that is free money. Problem is they have not seen the down market yet, they came after the conid period where the market is in uptrend or in sideways. So for them it feels like generating 15% to 20% is a cakewalk, which is actually not.
You can earn 15 to 20% of returns but you cannot generate that continously and thus once the market goes down and if uour portfolio suffers 30 to 40% down, you have to pay the EMI from your pocket because you will not generate any income from the stocks market. When you have your money in the market, you can take risk but when you have the loan monet it becomes quite risky. The finfluencers are not helping too. I know I am amount them now. We show that you cab generate 20 to 25% returns but in reality the backtest result is much more different than the reality.
No amount of backtest can give future predictions. You might generate or might not generate, so better is take the risk from your money. Build the skills, increase your income and then deploy that money in Stock market rather than borrowed money. I have also seen cases where a son has lost 8 lakhs of father retirement fund into FnO and thus his father have to start working again.
Posted Using INLEO