borrow to invest

sebastianj

Hello experts,
I can get hold of 20k at 6% for 3 years, can I make more by investing it? genuine guide most appreciated.
rgd seb

dunstonh

Potentially is the best way to answer that as it would depend on the investments you choose. You could of course lose money as investing shouldnt really be for terms less than 5 years due to the risk.

greenface

what is your plan and how much do you expect to make in 3 years and would it be worth it

jon3001

sebastianj wrote: »

Hello experts,
I can get hold of 20k at 6% for 3 years, can I make more by investing it? genuine guide most appreciated.
rgd seb

If after 3 years your investment had lost say 30% (down to £14k) how would you feel? How much risk are you prepared to accept to achieve greater gains?

jamesd

I'd be entirely happy to do that, but my risk tolerance is fairly high. You should ensure that you use investments where the potential drop in value is one that you could afford to pay, just in case you see the worst result.

One easy initial answer is the Halifax International regular saver that's paying 10% on up to 2,000 a month in deposits for one year. If you're a basic rate tax payer that gets you 8% after tax on perhaps 6-8,000 of it if you pay in at 2,00 a month for three or four months then drop to 100 so you get the 10% on the money for most of a year.

For a non-traditional option you could try offering to lend at Zopa in the 36 month markets at 9.5% after bad debt and fee, up to 50 Pounds per borrower, and you should get 20,000 lent out within a few months. If the bad debt allowances continue to be as generous as they have been you'd make perhaps 1-1.5% more than that, but the performance could be worse. You get regular monthly repayments that you could use to fund more traditional investments to reduce their risk. You can't withdraw the money any faster than the people who borrow it pay it back. It's taxable and you'd probably get about 8% after basic rate tax.

There's a wide range of more traditional investments that you could consider and I'd personally be looking to use those for most of the money, accepting the extra risk.

If you're 50 years old and paying higher rate tax its worth mentioning that, if you're interested in increasing the value of your pension income.

Conrad

The potential returns after tax are surely not worth the risk.

If you really do have high tollerence then maybe HSBOS and RBOS shares. As a mortgage broker I feel these organisations have been prudent domestic lenders. The upside potential is significant, but the downside is these organisations could go bust, and or the share price decline.

A lot depends on UK and US housing.
I offerd £60,000 under the summer 2007 price point on a house recently and it got accepted, but as yet I still have not proceeded as I feel nervous.
The idea is to make back that £60k with 12 - 36m subject to property prices fully recovering, which is a possibility with falling rates and US and UK Government interventions.
The rent yield is 6% - not great.

sebastianj

Many thanks jamesd and conrad for some explicit answers, I have lost a lot of money trading in stocks, so I am allergic to taking risks now. Conrad has got me thinking about other things now.
thanks all,
seb