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I began working as a full-time Data Analyst 5 months back. I am from India, I make $500 a month and I have $10 in my savings account.

I have about $900 invested in a company which I believe has the potential to return 3 times my investment in a year.

My credit card bill is $760 and the due date is next Monday (4 days away).

I see two possibilities:

  1. Borrow $760 from my friend and pay him back in 2 months. I'll be broke for two months and then I'll be fine. But I don't know how I will survive during these two months.

  2. Sell my stocks and pay the credit card bill.

However, I don't want to end my investment. I am unable to make a final decision. How do I resolve this situation wisely?

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    The credit card bill is irrelevant; would you borrow $760 from a friend, invest in the stock market, and then pay your friend back 2 months from now (either by selling stock or other means)? If the answer is no, then don't borrow the money. Sep 16 at 13:11
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    "I have about $900 invested in a company which I believe has the potential to return 3 times my investment in a year." - Can you get this money back? Anyone who promised 3x return in a year is likely scamming you.
    – noslenkwah
    Sep 16 at 13:37
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    If you believe an investment is particularly likely to triple/quadruple your money in a year (or give you anything more than like a 10% return, or maybe 20% in some rare cases), I'd be willing to put money on either that being a scam or you greatly misjudging how likely success is.
    – NotThatGuy
    Sep 16 at 13:38
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    Sorry to break it to you, but the company will not return 3 times your investment in a year. I'm sure it has the potential. But it won't.
    – Jeffrey
    Sep 16 at 13:54
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    @Daman - No need to beat yourself up over this. Scammers are good at what they do. I'd still at least try to get your money back.
    – noslenkwah
    Sep 16 at 15:02
67

Don't invest money that you cannot afford to lose at least in the short term. Don't lend or borrow from friends you cannot afford to lose, same with family members. Don't borrow money to invest that you don't have covered somewhere else.

In your case you should be focusing on controlling your expenses (i.e. your $760/month credit card bill) and building up your savings.

Oh, and this:

I have invested in a company that has enough potential to give me 3 times the return of my invested amount in a year, I guess

Probably not! you're setting yourself up for a failure.

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    @Daman what jwh20 means is that the investment in that company will probably not give you the return you are hoping for, and you may even not get back (the full amount of, or any of) your original investment.
    – Vicky
    Sep 16 at 13:08
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    It's that old adage: If it seem too good to be true, it probably is. Investments that promise extraordinarily high returns, in this case 300% in one year are either extremely risky or a scam. While there are circumstances where taking on some risk in investing makes sense, your situation certainly doesn't appear to be one of those.
    – jwh20
    Sep 16 at 13:12
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    I need to sell my stocks before I end up in debt thanks to all of you.
    – Daman
    Sep 16 at 14:44
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    A bit side track, but some recent mainstream IPOs in Indian markets have seen unbelievably high returns in short periods. (Happiest Minds Technologies Ltd: 800% in 1 year, Route Mobile Ltd: 490% in 1 year, Angel Broking Ltd: 300% in 1 year, Laxmi Organic Industries Limited: 360% in 6 months, Nureca Limited: 310% in 7 months, Easy Trip Planners Limited: 190% in 6 months, ) OP may be referring to one of those. (It's still extremely risky and should not be done unless you have more than you need.) Sep 16 at 18:34
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    Any investment that is potentially returning 300% in one year is also quite capable of losing much or all of its value in that same time period. That was my point.
    – jwh20
    Sep 17 at 13:11
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Investments with a high risk/reward ratio (such as stock, especially stock in one company rather than a broad portfolio) are more suitable for people who have already built up significant savings buffers in less risky structures.

I am not a financial advisor, but in your shoes I would:

  • sell the stocks to pay off the credit card bill
  • focus on making and sticking to an achievable budget that allows a certain amount to be put aside regularly in a savings account
  • continue saving in the account until you have enough saved to cover 2-3 months normal expenses, and/or the size of any reasonably foreseeable large expense (whichever is larger)
  • only look at stock market investments once that savings buffer was secure.
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  • I really appreciate thanks for your input, Vicky. I am controlling my expenses it's just hard for me Idk.
    – Daman
    Sep 16 at 12:31
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    Excellent answer, but I'd edit the 3rd bullet point to be saving for 2-3 months of expenses (rent, utilities, food) not 2-3 months of income. Your income is irrelevant - what you need is a buffer against disaster if the income stops, and that would be the ability to eat and have a roof over your head if there's a disruption to your income.
    – nuggethead
    Sep 16 at 13:50
  • @nuggethead thanks, good point.
    – Vicky
    Sep 16 at 15:31
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    Going off what nuggethead said, I'd suggest increasing that amount to 5-6 months, if not 12. It can take many months to find a new job and I'm not sure what India has for Unemployment benefits. It definitely takes a long time to get that much saved, but I can tell you from experience that it's worth it. Sep 16 at 18:15
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    Also, 12 months is a number I've heard by others and isn't my own recommendation. I will say that the more people have saved, the less likely they will need to pay interest rates on cards and loans. Sep 17 at 17:24
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  1. Don't borrow money from friends or family. The potential damage to the relationship is severe.
  2. Sell the stock and pay the credit card. Is this a minimum payment (meaning you will have a similar bill next month) or do the terms of the card require you to pay in full each month? It is absolutely vital that you get the usage of this card under control. If having this card makes it too easy for you to spend more than you can afford, then you need to get rid of it.
  3. List all of your monthly expenses and compare that to your monthly $500 income. If your expenses are near that or more, then you need to find ways to cut back your expenses.
  4. Once your finances are lined up and in control, then you can investigate whether your investment opportunity is actually a good place to invest. Until your finances are under control, it doesn't matter if it is a good investment opportunity. Right now, you cannot afford to invest.
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If I were your friend, I would not loan you $760 knowing that you had $900 tied up in a stock. I would advise you to sell the stock and hope that there's still time to buy back in if you have the money to do it in 2 months. Also, if the stock tanks, how are you going to pay your friend back?

You don't have $900 to invest in a company regardless of the profit potential. That's 2 month's salary for you. You need to build up some savings before doing any investing.

On top of all of this, I would try to understand how you racked up 1.5 months of CC debt in the first place? How are you going to enure that you don't dig yourself into another hole again?

I am over buying things. I have no control over credit card I have to get rid of it I guess. I think every month it ll be over and I will save but I don't know I am trapped in this vicious cycle of cc.

That's the root problem. If you don't solve that, the solution for this month is meaningless. Get on a budget. Stop using the CC and pay with cash (or a debit card that is rejected when your account is zero).

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    I hear you and know that it's hard to sell winners but I go back to: If you had $900 in cash now, would you buy this stock or pay your CC bill? If it were me, I would pay my bills and try to save up to buy the stock back later. Maybe you lose some in opportunity costs but it's not worth either missing a CC bill or owing money to a friend.
    – D Stanley
    Sep 16 at 16:05
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    Note that on top of all of this, I would try to understand how you racked up 1.5 months of CC debt in the first place? How are you going to enure that you don't dig yourself into another hole again?
    – D Stanley
    Sep 16 at 16:05
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    I am over buying things. I have no control over credit card I have to get rid of it I guess. I think every month it ll be over and I will save but I don't know I am trapped in this vicious cycle of cc.
    – Daman
    Sep 16 at 16:09
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    @Daman paying your friend back from your salary is not going to work if you keep spending 1.5x your salary. Even if you were saving half your salary each month, it would still take 3 months to get the money to pay back your friend, not 2 months. (and that's cutting your spending in 3, which is not going to be easy)
    – njzk2
    Sep 18 at 10:01
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    Make a budget. Start simple: 1/ fixed, required expenses (housing, utility bills, debt repayment if any, base food.) 2/ savings (as mentioned in some answers, try to get a few months of basic expenses on the side, to be safe) 3/ free (as in speech, not beer) money that you can spend as you like. The total cannot be above your income. If you want to spend a lot at once, say for a trip or a new computer, save money over several months until you can pay without debt.
    – njzk2
    Sep 18 at 10:05
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Stocks will or can crash any day, it's like gambling. Be aware that your stock may only be worth half that in a month (it's possible and it has happened). With that in mind pay what you owe first, then go gamble with the extra money that you don't need.

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Think for a second suppose somehow I managed to survive two months and I got 10% more return or maybe more I won't have chance to buy back from that low price it will be too late to buy that stock.

If the stock is going to give a 300% return in a year, buying back in after a 10% gain is not "too late" at all. In my opinion, this comment combined with the one about having "no control" over your credit card show that you are nowhere near ready to be investing in stocks. First, get your spending under control and pay off debts especially. DO NOT BORROW. Then save up a bit of a cushion. Then take some time for some reading and educate yourself about investing. Then start investing with money you can afford to lose.

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  • You are right absolutely thanks.
    – Daman
    Sep 19 at 3:00

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