Author Topic: Investing "Borrowed" Money  (Read 1399 times)

torbisen

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Investing "Borrowed" Money
« on: July 27, 2016, 03:10:35 PM »
I presented myself in another post here, but her is a short recap of my situation.

"Just found out ( i am not counting my money everyday or month, just acting a little mustachian and hoping for the best, checking now and then) That my family is only 80000$ off of beeing debt free. Means that our 470.000$ House  350.000$ Rental apartment and 54000$ Tesla actually is fully ours in just 18month keeping up the savingrate ;-). Thats a good start."

My money is actually organized this way:  I have around 100.000$ in a WorldIndex fund  and further around 200.000$ on an account so marginally lower interests rates than my loans that i have not bothered to pay the loans off with them. Its actually by subracting theese amounts from my debt that my "rest debt" is 80000$.

Because my house and apartment is so well paid off   (value 820.000$ and loans only 300.000$)  they will never be sold for any fall in the market. The income from the apartment will also be there even if the prices go down.  I plan to invest the rest 200.000$ in the stock market along with my already 100.000$.  I know loaning money for buying stocks is not nessesarily a good advice, but my interest rate is 1.9%  ( and could be locked to 3% for ten years if i want). I just dont see the stock marked give lower rates than that over time (japan is an example though).

Question is : Would you put it in or would you pay the loan? And would you put it in now, or would you wait. I cant help thinking that All time high after a continous climbing marked since 2008/9 almost is way due for an 50% down ride.

soccerluvof4

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Re: Investing "Borrowed" Money
« Reply #1 on: July 27, 2016, 03:55:06 PM »
I would not put money in the market borrowed even at 1.9% if I read that right.

Only you can decide when to put money in the market but statistically better now than later.  If you dont feel comfortable with that then divide by say 12 and put in equal shares once a month or a system you feel good about. You need to sleep at night. I was thinking samething at 14,000 on the Dow so thats how I did it. Whos to say the market will not go to say 21k on the Dow? you can make arguments to support whatever you want

Retire-Canada

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Re: Investing "Borrowed" Money
« Reply #2 on: July 27, 2016, 04:15:16 PM »
Question is : Would you put it in or would you pay the loan?

I'd have no issue investing money in the market instead of paying off a low interest mortgage. I have money invested that could accelerate my mortgage payments, but I am not doing so. My money is better off in the market than in my house.

Playing with Fire UK

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Re: Investing "Borrowed" Money
« Reply #3 on: July 28, 2016, 01:18:36 AM »
I'm fine with investing and borrowing at the same time. It is a very individual decision.

If you are truly concerned about the 'Japan' issue, then you need to look at whether you should be investing at all. I think that by investing globally you can avoid Japan style growth, and over the long term stocks will grow. This is independent of whether the money invested is borrowed elsewhere.

talltexan

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Re: Investing "Borrowed" Money
« Reply #4 on: July 28, 2016, 06:58:11 AM »
Normally I am a keep the mortgage and invest kinda of guy, but I reread your post, and you say you could pay off all your debts in 18 months?

Really, is that all? Because being completely debt free in less than two years sounds really awesome even to this guy who loves leverage. Do you think you'll miss out on a ton of growth in those 18 months? Because once you're debt free, you will have the cash flow to pump some major bucks in to your investment accounts. 18 months is just not a long time to achieve this. I say kill the debt!

mathjak107

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Re: Investing "Borrowed" Money
« Reply #5 on: July 28, 2016, 07:12:21 AM »
nothing wrong in your accumulation stage with investing borrowed money .

but  many folks do not realize that if you are retired and spending down from a portfolio you need to beat two parameters . not only do you have to beat the after tax return of the borrowed money which is pretty easy with the low rates on mortgages . but the other factor few realize is when spending down those gains have to be in a favorable order of gains and losses , just beating the average is not good enough .

increasing your draw to cover the mortgage increases sequence risk . not that it is still a bad idea but it does present another hurdle you have to clear .