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  • FIRST POST
    • MatthewAinsworth
    • By MatthewAinsworth 19th Mar 17, 1:30 PM
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    MatthewAinsworth
    Prepared to pay interest
    • #1
    • 19th Mar 17, 1:30 PM
    Prepared to pay interest 19th Mar 17 at 1:30 PM
    If the stock markets crashed say 40%, I'd be tempted to use my stooze pot to buy equities, even if that meant interest on a card. The main risk is that the recovery will be slow, so it really depends on what the card rate is as to how much time you have

    I think considering that it shouldn't be prohibitive to stooze straight to share funds in the first place-

    - if you gain, sell when 0% ends
    - if you lose a small amount, sell because you don't expect to recover more than the cards rate at any point in time
    - if you crash, hold, delay repayment, buy more until you nolonger expect a sufficient recovery to compete with the cost of the card. Remember you're not forced to sell so don't make real a bigger % loss than the cards rate.

    Obviously despite the risk of loss you wouldn't expect it on the whole
    And it makes affordability more important - ability to absorb interest and losses

    And run up card debt to buy during a big enough crash
Page 1
    • Ben8282
    • By Ben8282 20th Mar 17, 3:58 AM
    • 1,989 Posts
    • 863 Thanks
    Ben8282
    • #2
    • 20th Mar 17, 3:58 AM
    • #2
    • 20th Mar 17, 3:58 AM
    Crazy advice.
    • MatthewAinsworth
    • By MatthewAinsworth 20th Mar 17, 10:28 AM
    • 2,807 Posts
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    MatthewAinsworth
    • #3
    • 20th Mar 17, 10:28 AM
    • #3
    • 20th Mar 17, 10:28 AM
    Crazily profitable...
    • Anthorn
    • By Anthorn 20th Mar 17, 10:50 AM
    • 3,081 Posts
    • 790 Thanks
    Anthorn
    • #4
    • 20th Mar 17, 10:50 AM
    • #4
    • 20th Mar 17, 10:50 AM
    If the stock markets crashed say 40%, I'd be tempted to use my stooze pot to buy equities, even if that meant interest on a card. The main risk is that the recovery will be slow, so it really depends on what the card rate is as to how much time you have

    I think considering that it shouldn't be prohibitive to stooze straight to share funds in the first place-

    - if you gain, sell when 0% ends
    - if you lose a small amount, sell because you don't expect to recover more than the cards rate at any point in time
    - if you crash, hold, delay repayment, buy more until you nolonger expect a sufficient recovery to compete with the cost of the card. Remember you're not forced to sell so don't make real a bigger % loss than the cards rate.

    Obviously despite the risk of loss you wouldn't expect it on the whole
    And it makes affordability more important - ability to absorb interest and losses

    And run up card debt to buy during a big enough crash
    Originally posted by MatthewAinsworth
    Well there you go: You've already received comprehensive advice from Ben and Matthew so what can I add?

    On the face of it there appears to be not a lot of difference with getting a Money Transfer and sinking it in Savings accounts including interest paying current accounts and buying depressed equities after a recession that will almost certainly rise. The big word is when. Consider the last recession of 2008 and the fear of a double-dip recession in 2012. As it happened there was not a double-dip recession and the fear of it was prompted due to the economy not recovering as it should. If that happens to you there could be red bits appearing on your credit report!

    Overall, I would not go into debt to buy equities simply because of the largely unpredictable nature of them.
    • StopIt
    • By StopIt 20th Mar 17, 11:30 AM
    • 758 Posts
    • 687 Thanks
    StopIt
    • #5
    • 20th Mar 17, 11:30 AM
    • #5
    • 20th Mar 17, 11:30 AM
    This is why brokers love retail investors!


    Yeah, you'll buy stocks completely unhedged against a 40% fall in the stock markets? Using money borrowed from credit cards? Yeah, that's not lunacy!


    Also, why wait for a crash? If you're expecting a crash, you can bet against stock prices you know? I'd suggest doing some serious research into investing. Once you get into the terms CFD, Short Selling and Spread Betting and still understand what's going on, then maybe you can try this.


    If not, get a stocks and shares ISA, start small and try your little theories out. if it was so simple everyone would be millionaires, Del-Boy style.
    • MatthewAinsworth
    • By MatthewAinsworth 20th Mar 17, 1:53 PM
    • 2,807 Posts
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    MatthewAinsworth
    • #6
    • 20th Mar 17, 1:53 PM
    • #6
    • 20th Mar 17, 1:53 PM
    Adindas -
    And if the stock market has not recovered after your 0% card is ending what are you going to do ? Pay huge interest of 15% (say).
    If you expect it to recover more than the credit card rate in a year, it's worth the interest, otherwise repay accepting that minor losses are part of the deal but that the odds are in your favour

    12-15% is a normal return on 100% small cap

    Stopit- i certainly wouldn't bet on a fall, just having a strategy
    • MatthewAinsworth
    • By MatthewAinsworth 20th Mar 17, 3:00 PM
    • 2,807 Posts
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    MatthewAinsworth
    • #7
    • 20th Mar 17, 3:00 PM
    • #7
    • 20th Mar 17, 3:00 PM
    Adindas- covered by wages, and never borrow too much, that way there is no clock on the investment itself, other than a competing rate
    • Superscrooge
    • By Superscrooge 23rd Mar 17, 8:32 PM
    • 848 Posts
    • 589 Thanks
    Superscrooge
    • #8
    • 23rd Mar 17, 8:32 PM
    • #8
    • 23rd Mar 17, 8:32 PM
    http://monevator.com/why-borrowing-to-invest-is-a-bad-idea/
    • MatthewAinsworth
    • By MatthewAinsworth 23rd Mar 17, 8:37 PM
    • 2,807 Posts
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    MatthewAinsworth
    • #9
    • 23rd Mar 17, 8:37 PM
    • #9
    • 23rd Mar 17, 8:37 PM
    CC better than margin loan as investment not marked to market, and can be cheaper if you can maintain the 0% . Can't argue against the timing probably being wrong
    • stoozie1
    • By stoozie1 25th Mar 17, 8:44 AM
    • 294 Posts
    • 131 Thanks
    stoozie1
    I'm not advocating the OP's strategy and would also think of it as too risky for me to contemplate but I wonder why people exclude mortgage debt from the 'don't borrow to invest' advice.

    Most investors in the UK would I imagine have a large debt in the form of a mortgage but still invest rather than discharging the loan and then investing.
    • adindas
    • By adindas 25th Mar 17, 10:28 AM
    • 3,200 Posts
    • 1,531 Thanks
    adindas
    I'm not advocating the OP's strategy and would also think of it as too risky for me to contemplate but I wonder why people exclude mortgage debt from the 'don't borrow to invest' advice.

    Most investors in the UK would I imagine have a large debt in the form of a mortgage but still invest rather than discharging the loan and then investing.
    Originally posted by stoozie1
    Because for Mortgage especially for the first home is that owning your own house is a substitute to rent. Often if you have a large deposit, your mortgage installment might be the same or even lower than your previous rent you supposed to pay ?

    Unless you bought your house when they were high in price (e.g you will have negative equity), it is highly likely the value of your house are higher then when you first bought. The people who were in negative equity a few years ago might now see that they have gained from the value of their properties.
    • MatthewAinsworth
    • By MatthewAinsworth 25th Mar 17, 1:22 PM
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    MatthewAinsworth
    Adindas-
    .Unless you bought your house when they were high in price (e.g you will have negative equity), it is highly likely the value of your house are higher then when you first bought. The people who were in negative equity a few years ago might now see that they have gained from the value of their properties.
    The same with equities if you treated them the same way as housing - ie didn't sell in a crash. There is always a recovery, it just may take a few years

    Renting is borrowing... A whole property instead of simply part of its value

    And most people would be waiting forever if they paid off their mortgage first and would have less time to make a success of investing
    • adindas
    • By adindas 27th Mar 17, 10:28 PM
    • 3,200 Posts
    • 1,531 Thanks
    adindas
    [QUOTE=MatthewAinsworth;72306262]
    Adindas-

    The same with equities if you treated them the same way as housing - ie didn't sell in a crash. There is always a recovery, it just may take a few years
    Renting is borrowing... A whole property instead of simply part of its value
    Originally posted by MatthewAinsworth
    Renting is borrowing ???
    If you are living in London pay rent say £1500 a month for a flat. And now you bought a House and you pay mortgage of £1500 or even lower and by t he end of the mortgage period you already earn the house. Is it not clear ??

    Keep in mind the cost of borrowing with mortgage is low due to secure loan nature.

    And most people would be waiting forever if they paid off their mortgage first and would have less time to make a success of investing
    Originally posted by MatthewAinsworth
    And what prevent people to do both ?? Many people have mortgage and doing investing as well
    • adindas
    • By adindas 27th Mar 17, 10:29 PM
    • 3,200 Posts
    • 1,531 Thanks
    adindas
    Renting is borrowing... A whole property instead of simply part of its value
    Originally posted by MatthewAinsworth
    Renting is borrowing ???
    If you are living in London pay rent say £1500 a month for a flat. And now you bought a flat and you pay mortgage of £1500 or even lower and by the end of the mortgage period you already own the house.

    You put your house deposit into investment and say you make £1500 a month which is already very hard to get all of this money will go to your rent. BU the end of investment period your investment gain is already eaten by your rent.

    Is it not clear which one is the clear winner ??

    Keep in mind the cost of borrowing with mortgage is low due to secure loan nature.

    And most people would be waiting forever if they paid off their mortgage first and would have less time to make a success of investing
    Originally posted by MatthewAinsworth
    And what prevent people to do both ?? Many people have mortgage and doing investing as well
    Last edited by adindas; 27-03-2017 at 10:33 PM.
    • MatthewAinsworth
    • By MatthewAinsworth 28th Mar 17, 7:14 AM
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    MatthewAinsworth
    Adindas- of course mortgage the winner, i mean with renting you're borrowing the property itself and rent is the interest, it is a more expensive form of credit than a mortgage, and a different type since you don't get capital gains

    An interesting compromise is leasehold- still borrowing the property, but long enough to have capital gains

    Nothing stops someone having a mortgage and investing, i do, I'm saying if they overpayed the mortgage they forgo investment opportunity
    • Smiley Dan
    • By Smiley Dan 10th Apr 17, 10:00 AM
    • 932 Posts
    • 290 Thanks
    Smiley Dan
    It's a false dichotomy to compare the debt from a mortgage, which is low cost with a longer term, to the debt from a CC.

    Obviously both matter, but in terms of security and risk it's probably the term that's important. I remember during the early 2000s it took several years for the markets to turn again and a good six or seven years before they recovered their losses (and that's ignoring the cost of any debt taken out in the meantime!).

    This is a bad idea.
    • alexanderalexander
    • By alexanderalexander 16th Apr 17, 6:55 PM
    • 277 Posts
    • 160 Thanks
    alexanderalexander
    And most people would be waiting forever if they paid off their mortgage first and would have less time to make a success of investing
    Originally posted by MatthewAinsworth
    This is what I always think when I see people getting so horrified at the thought of borrowing to invest in the stock market. If you put any money at all into stock markets before you've paid off your mortgage, then you are indirectly borrowing to invest already. Almost everyone I know who invests in the stock market has a mortgage, so it clearly isn't all that odd a thing to do.

    The only big obvious difference here is that an interest-free credit card will jump to a horrendous interest rate (15%+) as soon as the promo period is over, whereas even the worst mortgage lenders' SVRs are only around 5% or so at the moment -- so you have to be pretty confident that you can re-finance to another 0% card or have some other back-up strategy for paying down your credit card debt.
    • MatthewAinsworth
    • By MatthewAinsworth 26th Apr 17, 3:45 PM
    • 2,807 Posts
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    MatthewAinsworth
    I'm tossing up the idea of a regular saver ready to pay it off with 100% certainty, or paying down the card directly for better credit rating from the next card, erring on the credit rating side.

    I would not balance transfer, as there's risk of rejection
    • Chrysalis
    • By Chrysalis 18th May 17, 10:03 AM
    • 1,976 Posts
    • 916 Thanks
    Chrysalis
    My advise is simple, if you can afford to clear the debt should your gamble not pay off, then go for it, if not then dont.

    I was thinking 6 months back to whack a few grand on chelsea winning the EPL using a credit card which I put at almost a certainty given historical data on EPL leaders with similar leads at that point of the season, they did actually win and I would have won a four figure sum, however since I wasnt prepared to clear the debt immediately should I lose I didnt go ahead with it. I also dont want to become a gambling addict and for that reason I am glad I didnt do it even tho they won.
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