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  • FIRST POST
    • C_Mababejive
    • By C_Mababejive 21st Sep 16, 7:54 PM
    • 9,833Posts
    • 8,989Thanks
    C_Mababejive
    Get personal loan>buy shares>make money..
    • #1
    • 21st Sep 16, 7:54 PM
    Get personal loan>buy shares>make money.. 21st Sep 16 at 7:54 PM
    Money is cheap now. Can anyone see how it can go wrong save for a market crash?
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
Page 1
    • Broken Biscuits
    • By Broken Biscuits 21st Sep 16, 8:00 PM
    • 281 Posts
    • 539 Thanks
    Broken Biscuits
    • #2
    • 21st Sep 16, 8:00 PM
    • #2
    • 21st Sep 16, 8:00 PM
    https://www.bogleheads.org/forum/viewtopic.php?t=5934

    Read market timers road to ruin following a similar strategy.

    Have a go once you have read this, what's the worst that could happen?
    • pfpf
    • By pfpf 21st Sep 16, 8:06 PM
    • 4,066 Posts
    • 2,807 Thanks
    pfpf
    • #3
    • 21st Sep 16, 8:06 PM
    • #3
    • 21st Sep 16, 8:06 PM
    loan a monopoly board>buy property>make money.

    stay safe and have fun.
    pfpf, the avatar previously seen as "the Monkey".
    • C_Mababejive
    • By C_Mababejive 21st Sep 16, 8:44 PM
    • 9,833 Posts
    • 8,989 Thanks
    C_Mababejive
    • #4
    • 21st Sep 16, 8:44 PM
    • #4
    • 21st Sep 16, 8:44 PM
    Heres my example

    Borrow 10,000 over 5 years at 3.2%apr TAP 10,822

    With the 10k buy for eg VOD current price 224p

    Number of shares bought =4464

    typical annual div per share = 11.30p

    Total divi pa is 504

    So for 5 years =2522

    If divi is reinvested then returns will be more..

    I am rubbish at maths,,tell me where it could go wrong?
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
    • bigadaj
    • By bigadaj 21st Sep 16, 9:11 PM
    • 7,380 Posts
    • 4,419 Thanks
    bigadaj
    • #5
    • 21st Sep 16, 9:11 PM
    • #5
    • 21st Sep 16, 9:11 PM
    Heres my example

    Borrow 10,000 over 5 years at 3.2%apr TAP 10,822

    With the 10k buy for eg VOD current price 224p

    Number of shares bought =4464

    typical annual div per share = 11.30p

    Total divi pa is 504

    So for 5 years =2522

    If divi is reinvested then returns will be more..

    I am rubbish at maths,,tell me where it could go wrong?
    Originally posted by C_Mababejive
    Well you'd presumably have to make loan repayments along the way so,wouldn't be able to invest the full owned amount, which would cut your projected returns.

    Dividend cover for many large stocks is currently inadequate, and Vodafone lost money last year. So you're looking at a dividend cut, which may well be accompanied by a drop in the share price.

    Would be better going for a fund with a spread of risk, but still no guarantee of profit.
    • Superscrooge
    • By Superscrooge 21st Sep 16, 9:12 PM
    • 505 Posts
    • 346 Thanks
    Superscrooge
    • #6
    • 21st Sep 16, 9:12 PM
    • #6
    • 21st Sep 16, 9:12 PM
    What could go wrong?



    There are plenty of large companies that have got into financial difficulty
    • C_Mababejive
    • By C_Mababejive 21st Sep 16, 10:39 PM
    • 9,833 Posts
    • 8,989 Thanks
    C_Mababejive
    • #7
    • 21st Sep 16, 10:39 PM
    • #7
    • 21st Sep 16, 10:39 PM
    I already have the money to make the loan repayments so it wouldnt come out of dividend return.
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
    • Flobberchops
    • By Flobberchops 21st Sep 16, 11:51 PM
    • 357 Posts
    • 217 Thanks
    Flobberchops
    • #8
    • 21st Sep 16, 11:51 PM
    • #8
    • 21st Sep 16, 11:51 PM
    I entertained similar ideas for a while until I realised consumer loans are amortising (i.e. you pay back the capital along with interest) while the money you're making on an investment is usually interest only.

    I tried to work out at what ratio of loan:investment you'd be turning a net monthly profit but the cogs in my brain jammed and I had to take a lie down. Is there a simple equation or rule of thumb out there?
    • bigadaj
    • By bigadaj 22nd Sep 16, 4:15 AM
    • 7,380 Posts
    • 4,419 Thanks
    bigadaj
    • #9
    • 22nd Sep 16, 4:15 AM
    • #9
    • 22nd Sep 16, 4:15 AM
    I already have the money to make the loan repayments so it wouldnt come out of dividend return.
    Originally posted by C_Mababejive
    So that will affect your net returns given that you are making repayments from another pot of money that could have been invested or earning interest or being used for some other use elsewhere.

    The other risks still stand.
    • richyg
    • By richyg 22nd Sep 16, 7:09 AM
    • 113 Posts
    • 121 Thanks
    richyg
    https://www.bogleheads.org/forum/viewtopic.php?t=5934

    Read market timers road to ruin following a similar strategy.

    Have a go once you have read this, what's the worst that could happen?
    Originally posted by Broken Biscuits

    Broken Biscuits - that thread of Market Timers is quite a story and I read it first a few years ago.
    • atush
    • By atush 22nd Sep 16, 11:42 AM
    • 15,159 Posts
    • 9,071 Thanks
    atush
    Money is cheap now. Can anyone see how it can go wrong save for a market crash?
    Originally posted by C_Mababejive
    Get a loan, invest in stocks, lose all the money, still owe the money.
    • AndyT678
    • By AndyT678 22nd Sep 16, 12:12 PM
    • 607 Posts
    • 800 Thanks
    AndyT678
    I agree that using a personal loan as seed money for investing is a bad idea.

    However, I and many others here still have mortgages whilst continuing to invest. On that basis I'd have to say that actually all of my S&S investments are funded by debt. It's basically what OP said at the start. Borrow cheap, invest long term and reap the rewards. It's just that a 20+ year mortgage term better matches an investing time horizon.
    • mapk
    • By mapk 22nd Sep 16, 1:11 PM
    • 112 Posts
    • 39 Thanks
    mapk
    Get personal loan>buy shares>make money..

    or Get personal loan>buy shares>lose money>do not pass Go>Go straight to jail
    • EdGasket
    • By EdGasket 22nd Sep 16, 1:55 PM
    • 2,935 Posts
    • 1,171 Thanks
    EdGasket
    It can work, on average, but you'd be silly to buy one share. What if you had bought Tesco at 300p or more? You'd have lost half your capital, be getting no dividends now, and still have the loan to repay. Better would be to borrow money and invest in a diversified fund or two and be prepared to stay with the experiment through a market crash.
    • Malthusian
    • By Malthusian 22nd Sep 16, 4:48 PM
    • 952 Posts
    • 1,276 Thanks
    Malthusian
    However, I and many others here still have mortgages whilst continuing to invest. On that basis I'd have to say that actually all of my S&S investments are funded by debt. It's basically what OP said at the start. Borrow cheap, invest long term and reap the rewards. It's just that a 20+ year mortgage term better matches an investing time horizon.
    Originally posted by AndyT678
    It's not really funded by debt unless you're in negative equity. And with today's economic environment and LTV rates that's a pretty remote possibility. If I have a 200,000 mortgage and I invest 15,000 of spare income in a stocks and shares ISA I haven't really borrowed to invest when the house is worth 250,000.

    Even in the worst case scenario where I invest the money so idiotically that I lose every penny of the 15,000, I still have the house, and I'm presumably still paying the mortgage.

    However if I'm not investing spare cash but instead borrowed 15,000 to invest, and it doesn't grow by enough to repay the loan and the interest, then I have to find the difference elsewhere. Remortgaging, say. If I have no other assets and can't get credit then it's bankruptcy for me.

    As the small print on the spread betting advert says, losses can exceed deposits. That's the difference between investing earned income in S&S when you have a mortgage (secured against an asset greater than the mortgage) and investing borrowed money.

    Most of us would not tolerate an investment so risky that there is a material risk of it going from 15,000 to 0, even fewer would tolerate a leveraged investment with a very significant risk indeed of going to a figure less than 0.

    I am rubbish at maths,,tell me where it could go wrong?
    by C Mabebejive
    If you're rubbish at maths then why do you think that ultra high risk gambling with your finances is a good idea? It's like saying you're planning to run across the M4, then in your second post revealing that you're blind and deaf from birth. It explains why you might be considering such a stupid idea (as you have no concept of how fast a car can move and how hard it can hit) but it also makes it all the more urgent that you don't do it.
    Last edited by Malthusian; 22-09-2016 at 4:50 PM.
    • Thrugelmir
    • By Thrugelmir 22nd Sep 16, 6:12 PM
    • 49,931 Posts
    • 41,611 Thanks
    Thrugelmir
    Money is cheap now. Can anyone see how it can go wrong save for a market crash?
    Originally posted by C_Mababejive
    Why is money cheap?
    A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against a rainy day.
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