Borrowing on my house to invest - am I crazy?

kenshaz

stevemanser wrote:

Yes, they probably wouldn't go for it unless it was for "home improvement" etc. One would have to lie.

Well if they would not lend if you told them the truth ,it is a high risk strategy,question answered

Deemy

stevemanser wrote:

I bought a house in 1990 and it's value has quadrupled over the past 15 years. I am paying around 5% interest on the mortgage, and during that time the stock market has risen at around 14% each year. Has anyone ever re-mortgaged to release equity and then used that money to invest in shares or a GEB (Guaranteed Equity Bond - see Martin Lewis's info here )? What are the pitfalls?

yes, your crazy....

GEB ? 5 years - work out what the interest compounded would be on zero risk - ..... yeh about 30%.

Yes we are in a bull market, and yes 2006 is likely to beanother gain year.

But will you be able to sleep at night during the down days, weeks, months ?

10% falls? , 20% falls ? Will you be able to exit at a stop loss level rather than keep holding on in the hope of a recovery ?

If your answer is no, then your taking on way too much risk.

EdInvestor

Tim_L wrote:

So really the only gain is that the loss has been floored at the capital amount less 5 years interest.

And 5 years' inflation

dunstonh

GEBs are atrocious half way houses - they are marketed as simple products for the "man in the street", suspicious of the motives of actual experts, apparently removing any need for advice or specialised knowledge, and being painted as no-risk products when they're nothing of the sort.

Tied advisors are not allowed to recommend investment funds. So, this product, with no investment funds, suits tied agents perfectly. It also has a couple of positive features which can make it sound excellent. If the negatives are not pointed out, then you wouldn't realise how poor they are.

They are totally the product the inexperienced and/or tied advisor to sell. Its a shame to see that some IFAs sell lots of these as well. However, again it appears its the larger salesforce firms that do the majority. Salesforces of any type usually result low technical knowledge and sales targets (with exceptions). They would rather get the sale of an easy product than risk no sale by putting someone off that product and encouraging them into the alternatives.

ReportInvestor

Spot on dh. They are the tied advisers modern substitue for with profits, which was how they used to entice people with stories of "secure" returns from the stock market.

I'm also a tad concerned about Martin's (albeit properly qualified) endorsement of GEBs on the site. Not everyone reads the small print, even when it is in MSE size typesetting.

System

I often make attempts to persuade people at MSE to visit us on the gambling board and make a bit (or in fact a lot) of money from risk free betting. Most people react with utter horror that anyone would suggest gambling as an investment strategy. Yet by taking out a GEB you are doing nothing more than betting on the level of an index at a particular point in time. Your stake is about 20% of the final value of the money you allocate to the bet, and your potential winnings are capped.

Would love to join you but since i have a concentration span of a gnat, the only game i know is Bingo.:mad:

Tim_L

Judi wrote:

Would love to join you but since i have a concentration span of a gnat, the only game i know is Bingo.:mad:

Anyone can make £500 in 6 weeks without very much effort and without straying much outside the big UK bookmakers, and plenty more is available with a little bit more work. I've made something approaching £15,000 since August 2004, all tax free, and all essentially risk free (where there are risks they are mostly connected with making a mistake), though I am doing it more intensively than most and have a fair amount of money - about 12K currently - "invested" (i.e. out with bookmakers). To start out you only need a couple of hundred pounds capital, and for the first year I wasn't using much more than this at any time.

It's by quite some distance the most profitable thing I've learned from this site - it beats stoozing into a cocked hat - and really very easy to do, but for some reason still regarded with suspicion by the mainstream.

Tim_L

ReportInvestor wrote:

Spot on dh. They are the tied advisers modern substitue for with profits, which was how they used to entice people with stories of "secure" returns from the stock market.

In my opinion with profits are much better products, in theory at least, because they do lock in profits throughout the term and there is an exit route.

ReportInvestor

Tim_L wrote:

and there is an exit route [from with profits].

but only with a MVR (market value reduction) or MVA (market value "adjustor" ) which was concealed from most buyers in the 1980s and 1990s.

We'll have to part company on opinions about with profits, TL. I won't have my name associated with it in any way.

carnet

ReportInvestor wrote:

but only with a MVR (market value reduction) or MVA (market value "adjustor" ) which was concealed from most buyers in the 1980s and 1990s.

It's also called a UPA (Unit Price Adjustment) - at least as far as SLAC's WP Bonds are concerned .

Don't think it was "concealed" - it was always mentioned in the small print - for anyone who cared to read it.