Last week, someone on Twitter posted a screenshot of their stock portfolio with a caption that read, “Took a small loan, invested in smallcaps, up 40% in 8 months. Best decision ever.”
Posts like these get thousands of likes. But they also send the wrong message.
Between 2023 and 2025 (till May) alone, Indians borrowed over ₹3 lakh crore through personal loans, with a large chunk driven by young, salaried individuals.
At the same time, retail participation in equity markets has surged with demat accounts crossing 19 crore in 2025, up nearly 3x in five years. Many are now connecting the dots: borrow cheap, invest fast, get rich.
But here is the truth no one shares in those viral screenshots Loan EMIs are guaranteed. Stock returns are not.
And when the math fails, it fails really hard.
The Math Is A Trap Here.
Let us take the most common argument people use:
“If I borrow at 12 percent and invest at 18 percent, I make a 6 percent profit. What is the problem?”
Here is the problem: that 6 percent is not real unless everything works out perfectly. And in the stock market, things rarely go perfectly.
Say you take a ₹5 lakh personal loan for 3 years at 12 percent interest. Over those 3 years, you will end up paying about ₹1 lakh in interest.
That means your investment needs to grow from ₹5 lakh to at least ₹6 lakh just to cover the cost of the loan. That is 20 percent cumulative over three years, before tax.
And let us talk about this so-called 18 percent return that many people assume.
Sounds simple but here is the reality.
Warren Buffett, probably the most successful investor in history, has generated around 19.9 percent annual returns since 1965. That is nearly 60 years of compounding.
But even he has not done it consistently.
In fact, in the last 20 years, since 2005, he has delivered close to 20 percent returns only 9 times. That is less than half the time. And this is someone with decades of experience, access to the best research, and incredible discipline.
Of course, people argue that he had too much capital to deploy, or the market was different, or we are smaller and can move faster. Maybe. But if someone like him hits 20 percent less than 50 percent of the time, it shows how difficult this number really is.
Especially over a short time frame like 2 to 3 years.
That is the bigger point.
The shorter your investment window, the higher your risk.
Now, when people plan for 18 percent returns in just a few years, while also paying loan interest, they assume everything goes right. But that rarely happens. To hit those returns in such a short period, you need:
- The stock market to perform exactly as expected
- No negative return in any single year
- You buy and sell at the perfect time
- No delays, no missed opportunities
- And somehow, your profits remain untouched by taxes
In real life, these things do not line up so neatly.
Even the best mutual funds do not deliver double-digit returns every year. Some years are flat. Some go negative. Individual stocks are even more volatile. Your investment might go down 10 or 20 percent before it starts recovering.
And even if you make a gain, short-term capital gains tax will reduce your profits. If you exit within one year, the tax is 20 percent.
That makes your break-even point even harder to reach.
At the same time, the loan continues like clockwork. The lender will not wait for the market to bounce back.
Here is the issue. If everything goes perfectly, you might earn a little extra. But if anything goes even slightly wrong, that is if the market dips, if your stock underperforms, if your exit is poorly timed then you lose both money and peace of mind.
And when the gap between success and failure is this small, the risk is just not worth it.
What You Should Avoid → No Matter What
In my view, there are a few things every investor should stay away from, especially when it involves borrowed money. These are not grey areas. These are hard lines.
1. Never take a personal loan to invest in stocks.
This is the first and most important rule. A personal loan is expensive, fixed, and non-negotiable. The market is uncertain, volatile, and emotional.
You are mixing something rigid with something unpredictable and that is a recipe for stress. Even if it works once, it is not a habit worth repeating.
2. Do not convince yourself that “this time is different.”
Every bull market comes with a sense of confidence. People believe they have figured out the system. They see others making money and feel left out. The urge to “catch up” is real.
But investing is not a race. And whenever people take shortcuts, it almost always ends badly.
3. Avoid thinking of the stock market as a loan repayment strategy.
I have heard this line often that “I will invest this loan, earn returns, and use that to pay back the EMI.”
Again, that just sounds smart on that Excel sheet only, but it rarely works. The market does not send you money on a fixed date. Returns do not come in EMIs. Your loan will keep taking money out of your account whether your investment goes up or down.
4. Do not make decisions based on social media screenshots.
Someone’s win may be real, or it may be cherry-picked or photoshopped 🙂.
Either way, it is not your reality. You do not know how much risk they took, how much they lost before, or what they are hiding. If you build your financial life on someone else’s highlight reel, you will always feel behind.
Final Thought
Harshad Mehta said in Scam 1992, “Risk hai toh ishq hai.”
But I have a different take: “Personal Loan EMI hai toh neend nahi hai.”
Borrowing to invest or trading feels bold until the first market dip. That tension is just crazy!
The loan does not care if your stocks are down. The EMI will still come. Every single month.
Build wealth the steady way. With your own money and with your own pace. And let the high-stakes drama stay on screen not in your life.
Note: This article relies on data from fund reports, index history, and public disclosures. We have used our own assumptions for analysis and illustrations.
The purpose of this article is to share insights, data points, and thought-provoking perspectives on investing. It is not investment advice. If you wish to act on any investment idea, you are strongly advised to consult a qualified advisor. This article is strictly for educational purposes. The views expressed are personal and do not reflect those of my current or past employers.
Parth Parikh has over a decade of experience in finance and research. He currently heads growth and content strategy at Finsire, where he works on investor education initiatives and products like Loan Against Mutual Funds (LAMF) and financial data solutions for banks and fintechs.