A friend wants to trade with the conditions given above.

1. Do you think conditions in the market look positive enough for him to pay back capital borrowed, interest and make at least 25% gain in the short (6months) to medium (1yr) term? He is only interested in capital appreciation of the selected stocks.

He wants to focus on the Banking, Insurance and Food & Beverages sector. He intends to pull out of any stock once he's achieved a set percentage growth and plough it back into another one.

2. Do you think the cost (buy and sell fees/commission) of turning around the funds will outweigh the gain? Kindly brain storm with me. Your ideas will be highly valued.

Quite an interesting dilemma. My broker just offered my 21% with a 2% "management fee." Add in ~2% every time you buy or sell and you'll see that I need to make 30% just to break even. I have considered it and decided to source for cheaper funds. I can pick stocks I'm pretty confident will out-perform the market, the question is "what direction is the market headed"? No one can predict that. If the NSE heads south in 2008, I'll have to sell my actual holdings to repay the margin facility.

My advice: tell your friend to look for a cheaper loan. If he can't find one, go for it and focus on Insurance stocks.

Mr. Easimoni thanks - I appreciate d way you expanded on the issue and shared your own experience.

In the first case - can you pls recommend the broker that offered you 21% with 2% management fee?
As regards picking stocks that will outperform the market - I also believe this can be achieved by doing one's research well, seeking other "eggheads" opinion, adding all together, sifting through before making a final decision. Most importantly, praying that the "market heads north" for majority of your investments.

Another point I ought to have disclosed is that the bank/brokerage firm is offering my friend N12M, his own stake/collateral is N6M portfolio value.
Do you think the rate of interest given varies depending on amount a client is willing to put down?

Once again, thank you for sharing your thoughts - makes one explore deeper within d white cells before taking the step.

CMI,
I don't think the rates are tied to the size of the investment/margin facility.

And I use Lead Capital

@ easimoni

pls can u expanciate on this, i am in chicago and i plan to go to naija soon, to see leadcapital about their margin facility, how much can one get say with 4m.

epetedo,

Read Lead's Margin policy here

http://www.leadcapitalng.com/client_services/stock_brokerage.asp

In a nutshell, if you put down 4m, you can borrow another 4m. When you get back, lemme know how it went.

Merry Xmas

@ easimoni

thanks a lot, i spoke to them b/4 and they said the amount to open is 1m for margin. do u know if it is a straight forward process i.e i give them money they give me margin, because some of them say u have to have acct with a particular bank(usually the bank giving the money) and when u do open one they now tell u that the acct is not 6months old.

have a MERRY XMAS and a prosperous NEW YEAR.

Thank you for information shared @easimoni.  What is your experience with LeadCapital? Are they prompt when it comes to sell/buy mandates? Will you recommend them to your close pal or your enemy?   Best regards and forever Northwards, may your investments head.