Author Topic: Investing for < 1 year  (Read 4553 times)

mbk

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Investing for < 1 year
« on: May 31, 2013, 01:46:22 PM »
I took out a 1 year 0% APR, 2% fee balance transfer from my credit card for $15000.  And the minimum payment due is around $300 and decreasing. My initial plan was to pay it back @ $2k/month in 7.5 months. But if I do that I am loosing out interest free money. Also my effective APR increases. So I want to invest the balance of $1.7k every month for a time period less than 1 year.
Initially I thought about LendingClub, but their notes have a time period of 3-5 years. My previous individual stock investments (around 2007) resulted in complete loss, so I don't want to go that way. Do I just invest in ETF's and take out the money before the balance transfer offer period ends? If so what kind of asset allocation should I be looking at?
If any one with experience can share their wisdom, I'd be obliged.
I understand investing comes with risk and I can absorb a loss of up to $1k-2k.
With such a short period, I am thinking timing matters (here I don't mean individual stocks, but overall investment options like bonds vs. stocks vs. ...). Am I correct in my assumption?

Thanks

matchewed

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Re: Investing for < 1 year
« Reply #1 on: May 31, 2013, 01:51:20 PM »
I personally think you're taking a big risk and do not have all the downsides laid out. Short term investing of 15000 can make you lose much more than 1-2k. Plus anything that gets sold prior to a 1 year holding period would be subject to short term capital gains, anything longer would be long term capital gains. I do not know of a single investment which can guarantee the return you're looking for to compensate for the taxes and provide you with a low enough risk to guarantee a loss of no more than 10%.

NumberCruncher

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Re: Investing for < 1 year
« Reply #2 on: May 31, 2013, 02:57:29 PM »
I personally think you're taking a big risk and do not have all the downsides laid out. Short term investing of 15000 can make you lose much more than 1-2k. Plus anything that gets sold prior to a 1 year holding period would be subject to short term capital gains, anything longer would be long term capital gains. I do not know of a single investment which can guarantee the return you're looking for to compensate for the taxes and provide you with a low enough risk to guarantee a loss of no more than 10%.

+1 

Really, nothing much to add. Unless you have cash in hand elsewhere to pay back the card when the year is up, this is a huge risk, as I'm sure the APR jumps to something ridiculous.

The general investment advice you see is don't invest short term (<5 years) in the stock market or other risky places. You're trying to time the market, and even the vast majority of professionals (all professionals?) are pretty crap at this.

mbk

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Re: Investing for < 1 year
« Reply #3 on: May 31, 2013, 04:33:45 PM »
I personally think you're taking a big risk and do not have all the downsides laid out. Short term investing of 15000 can make you lose much more than 1-2k. Plus anything that gets sold prior to a 1 year holding period would be subject to short term capital gains, anything longer would be long term capital gains. I do not know of a single investment which can guarantee the return you're looking for to compensate for the taxes and provide you with a low enough risk to guarantee a loss of no more than 10%.

+1 

Really, nothing much to add. Unless you have cash in hand elsewhere to pay back the card when the year is up, this is a huge risk, as I'm sure the APR jumps to something ridiculous.

The general investment advice you see is don't invest short term (<5 years) in the stock market or other risky places. You're trying to time the market, and even the vast majority of professionals (all professionals?) are pretty crap at this.

Thanks guys. I'll add more details.
I took out the money for some real estate investment in India (I am from India). The investment generates little passive income, but the expected capital appreciation is significant. The regular APR on the card is 8%. And I am looking at any option that generates > 0% return during the remaining 10 months. But based on your message, its better I pay back the amount as planned before.
Thanks again.

irastache

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Re: Investing for < 1 year
« Reply #4 on: May 31, 2013, 05:23:58 PM »
+1 for NumberCruncher. This was popular some years ago when savings rates were higher and a certificate of deposit could generate 4-5%.

Now the rule is more clear: NEVER invest with leverage (cash generated from debt).  It is never a good idea. The gains are not worth the risk.

ncornilsen

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Re: Investing for < 1 year
« Reply #5 on: May 31, 2013, 07:08:59 PM »
You could make up to $150 over 6 months on that money using the savings bonus/match thing from BBVA Compass.  OK return for an FDIC insured  savings account.  you certainly wouldn't have to put ALL of that money in there to get the $150, either.

Freeyourchains2

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Re: Investing for < 1 year
« Reply #6 on: June 04, 2013, 10:22:41 AM »
Take a Risk, have fun, don't get emotional, stick to your plan.

I took a risk buying Tesla Motors stock at $40/share while Jimmy remodeled his kitchen for no reason. Now the government thinks they are entitled to my reward when they took no risk.

But since you are technically borrowing someone's else's money instead of using your own savings, it's like doubling the risk for double the reward.

Though you get screwed twice if you fail. Which doubles the chances of you getting emotional or not sticking to your plan, because the stress is twice as much.

Think about this for a moment:

Say you are Financially Independent early in life and volunteering at the library at age 40 (because you love knowledge and wisdom). The library attendent decides they would love to pay you to oversee the library once or twice a week, and you accept because it's your favorite hobby to do anyway, reading books and watching people. You earn $2000 after the month, preferably in cash for doing something you would have done for free.

You then don't have as much stress on losing the $2000, as someone whom still works for a living, or even worse people that borrow for a living.

Plus you have the time to do research, practice not getting emotional, or watching the markets daily, etc.; which gives you an advantage over 95% of other professionals and their bosses breathing down their necks.

Thus you make $6,000 (minus tax income bracket in taxes, unless you are FI and living on less than $35k-6k /person) in less then a month from the Tesla Motors opportunity you say during your free time and curiosity.

Your Mustachian lifestyle plus Financial Independence gives you quite an advantage over 95% of the rest of the world. You become a super hero/ God compared to others.

Then you go back to reading your books, at the library with even more of a stache.
« Last Edit: June 04, 2013, 11:38:15 AM by Freeyourchains2 »

matchewed

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Re: Investing for < 1 year
« Reply #7 on: June 04, 2013, 10:47:30 AM »
What are you even talking about?

The OP is asking if he/she should borrow 15k from their credit card company to invest at for less than a year. Which is generally a bad idea.

Tyler

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Re: Investing for < 1 year
« Reply #8 on: June 04, 2013, 12:14:33 PM »
What are you even talking about?

The OP is asking if he/she should borrow 15k from their credit card company to invest at for less than a year. Which is generally a bad idea.

+1

Setting aside for the moment the foolishness of investing on short-term credit card margin, if you're in the position where you had $15k in credit card debt to begin with, there are more important financial matters to attend to than investing right now.

Pay off your debts first. Invest later.

aj_yooper

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Re: Investing for < 1 year
« Reply #9 on: June 04, 2013, 08:07:45 PM »
mbk your plan is more like casino gambling with leveraged funds.  It is bat shit crazy!  Don't.

Khan

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Re: Investing for < 1 year
« Reply #10 on: June 05, 2013, 03:38:00 AM »
Short answer: No.

Long answer: Hell no.


No return on investments is guarenteed, doubly so for the short term, and triply so for the stock market. Look in the mirror, is Warren Buffett looking back at you? No? Then stay the fuck away from leverage, you're not smart enough to use it correctly. Leverage can be used like a scalpel in the hands of the right person, but hold it the other way, and it's cutting off your own goddamn fingers.

Addendum: Warren Buffett's plans are also measured in years(plural), decades, and lifetimes to boot.
« Last Edit: June 05, 2013, 03:41:48 AM by Khanjar »