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  • FIRST POST
    • MatthewAinsworth
    • By MatthewAinsworth 19th Mar 17, 12:30 PM
    • 2,388Posts
    • 945Thanks
    MatthewAinsworth
    Prepared to pay interest
    • #1
    • 19th Mar 17, 12:30 PM
    Prepared to pay interest 19th Mar 17 at 12:30 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, 2:58 AM
    • 1,634 Posts
    • 641 Thanks
    Ben8282
    • #2
    • 20th Mar 17, 2:58 AM
    • #2
    • 20th Mar 17, 2:58 AM
    Crazy advice.
    • MatthewAinsworth
    • By MatthewAinsworth 20th Mar 17, 9:28 AM
    • 2,388 Posts
    • 945 Thanks
    MatthewAinsworth
    • #3
    • 20th Mar 17, 9:28 AM
    • #3
    • 20th Mar 17, 9:28 AM
    Crazily profitable...
    • Anthorn
    • By Anthorn 20th Mar 17, 9:50 AM
    • 2,973 Posts
    • 768 Thanks
    Anthorn
    • #4
    • 20th Mar 17, 9:50 AM
    • #4
    • 20th Mar 17, 9:50 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.
    I don't think and I know I don't think so therefore I am. At least I think so. But hold on I don't think ... er ...
    • StopIt
    • By StopIt 20th Mar 17, 10:30 AM
    • 114 Posts
    • 89 Thanks
    StopIt
    • #5
    • 20th Mar 17, 10:30 AM
    • #5
    • 20th Mar 17, 10:30 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, 12:53 PM
    • 2,388 Posts
    • 945 Thanks
    MatthewAinsworth
    • #6
    • 20th Mar 17, 12:53 PM
    • #6
    • 20th Mar 17, 12:53 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, 2:00 PM
    • 2,388 Posts
    • 945 Thanks
    MatthewAinsworth
    • #7
    • 20th Mar 17, 2:00 PM
    • #7
    • 20th Mar 17, 2:00 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, 7:32 PM
    • 775 Posts
    • 550 Thanks
    Superscrooge
    • #8
    • 23rd Mar 17, 7:32 PM
    • #8
    • 23rd Mar 17, 7:32 PM
    http://monevator.com/why-borrowing-to-invest-is-a-bad-idea/
    • MatthewAinsworth
    • By MatthewAinsworth 23rd Mar 17, 7:37 PM
    • 2,388 Posts
    • 945 Thanks
    MatthewAinsworth
    • #9
    • 23rd Mar 17, 7:37 PM
    • #9
    • 23rd Mar 17, 7:37 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, 7:44 AM
    • 38 Posts
    • 6 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, 9:28 AM
    • 3,008 Posts
    • 1,400 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, 12:22 PM
    • 2,388 Posts
    • 945 Thanks
    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
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