Author Topic: Ideas for a year with money at 2%?  (Read 2720 times)

Left Bank

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Ideas for a year with money at 2%?
« on: February 28, 2014, 07:27:33 AM »
I haven't been able to come up with a solid idea so I thought I would throw it out to the MMM community.  I got an offer from my CC to borrow money at 0% interest for a year (2% fee though) and thought there should be a way to put this money to use for me. It could be as sizeable as 30k.

Ideas? 
 
One thing I thought of was to use it to invest in Uhaulinvestor at a high interest rate and pocket the difference the first year thus "boosting" the overall rate of return.  Paying off the loan to the CC at 12mths would not be an issue.  Not sure I am convinced to go forward with Uhaul though.  Other ideas to glean a little capital from this opportunity?

arebelspy

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Re: Ideas for a year with money at 2%?
« Reply #1 on: February 28, 2014, 07:37:59 AM »
Yes, credit card arbitrage like this is a common tactic for making a little money.

I did it a lot in college, when those little bits of money seemed like a lot.  Then I didn't bother for a few years, as the offers weren't that good.  Recently I got a 0% offer with no balance transfer fee (first one I've seen in awhile), so I went ahead and did it.

As far as the U-Haul investment idea, I'm not a fan of it personally:
https://forum.mrmoneymustache.com/investor-alley/u-haul-u-notes/

I don't think you're properly compensated for the risk, thus the risk-adjusted return is terrible, from my calculations.
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Left Bank

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Re: Ideas for a year with money at 2%?
« Reply #2 on: March 05, 2014, 07:23:18 AM »
Anyone think it would be worth it to take the CCs money at 2% for twelve months and pay down my 4.5% investment property mortgage? 
As I said above, coming up with the money when it is due would not be a problem. 

KingCoin

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Re: Ideas for a year with money at 2%?
« Reply #3 on: March 05, 2014, 07:41:46 AM »
Anyone think it would be worth it to take the CCs money at 2% for twelve months and pay down my 4.5% investment property mortgage? 
As I said above, coming up with the money when it is due would not be a problem.

Sure. You essentially have the same problem that banks have. You're able to borrow short term at a low rate and lend long term at a higher rate. Like a bank, you're exposed to rising short term borrow rates (your cost explodes after a year) and liquidity concerns (your credit card loan comes due earlier than your mortgage).

If your circumstances dictate that you'll for sure have the money to pay down the loan, despite the performance of your real estate and investment portfolio, then go for it.

It's worth noting that you can leverage your investment portfolio through a broker like Interactive Brokers for less than 2% (1.57%-0.57% depending on how big you're swinging) if interested. That rate will float, but isn't subject to a 1yr enormous jump. Personally, I find that method of borrowing more attractive, provided your leverage is reasonably modest.

 

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