Most sensible use of a loan to invest

Albermarle

GSP said:

On a slightly different note about a scenario for taking out a £10k loan and involving investments or rather a pension itself.

Say someone was in drawdown and withdrew cash several times a year to live on. Now, say at the point the latest cash withdrawal was running out and it was time to think about the next withdrawal, and the markets and pension suffered a large fall.

To withdraw and when the pension is well down as we know has a bad effect. Has anyone ever taken out a loan to tide them by until the pension rises again somewhat?

The usual advice is to have some cash savings to cover the worst of a market downturn . Either inside or outside the pension .
Alternatively cash in non equity investments in the pension , such as bonds .
In the absence of cash , what you suggest is an alternative, although some would be uncomfortable with taking out loans in this scenario.

GeoffTF

Thrugelmir said:

GeoffTF said:

steampowered said:

GeoffTF said:

There are always lots of posts about leveraging up just before the market crashes, but few, if any, down at the bottom.

The underlying assumption of your post is that you think we are just before a crash. Interesting that you think you can predict the markets. Might I suggest an alternative career as a trader? 

No, you cannot conclude that from my post. There are always lots of people leveraging up on the run up to the peak too. When that happens, you can see that there is a bubble, but you do not know when it will burst. If you get out early, you miss out on a profit. If you stay in too long, you get burned. The best you can do is stay invested, but invest more than you can afford to lose. That generally involves deleveraging from 100% equity, not leveraging up.

Until you liquidate out it's just a number on the screen. Hence the expression Cash is King.  Wanting a little bit more trips many an investor up. 

If you believe that, you never buy equities at all. The point that I was making is that the more over-priced the market gets, the more we see internet posts about leveraging up. That does not, however, reliably tell us when we have got to the top. Selling out because we think the market is expensive, and hoping to buy back in again at a cheaper price is generally not a good idea.