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Getting loan and investing - smart or stupid?

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Day Trader
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Getting loan and investing - smart or stupid?  Reply with quote  

What do you think about getting a loan from the bank in order to invest in a GROWTH related Mutual Fund with potentially above average returns?
Post Thu Sep 01, 2005 3:24 am
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grantchen
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Aggressive investment and risk are always bound together. If your expect that the return on your investment is much bigger than the interest you have to pay for the loan, then it is probably a good choice. Otherwise, it is not worth taking the risk of losing your money. In the last couple of years, investing in reas estate is more profitable and less risky than other investment vehicles. Right now it might not be a good time to tap into the market, but bidding on foreclosure properties might get you a pretty good deal.

Last month someone bought a two-family property in downtown of Albany, NY on a court auction. Guess how much did it cost? Around $ 65,000! He then can rent the property for at least 1000/month, which is enough to cover the loan cost less than $400, which includes the mortgage payment of $330(loan amount 55000, 30 years fixed, interest rate of 6%), tax and insurance, and still makes money. Not to mention the huge appreciation potential of this property in the capital city of NY.
Post Thu Sep 01, 2005 3:33 pm
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ushomeloans
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I always thought, wouldnt the taxes for capitol gains counter act any earnings? I wouldn't do it unless you are fine with filing for bankruptcy if everything goes sour
Post Thu Sep 08, 2005 11:05 pm
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AlFromLA
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i think its smart unless you are certain or good ROI (like you have some sort of inside info) or else I am not sure if it is so smart. Unless the loan is very low interest rate.
Post Tue Mar 09, 2010 12:45 am
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thad99
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I am not a fan of taking out a loan just to invest it is something. It can be very risky and dangerous, because you can lose your money. You also need to be able to make the monthly payments on your loan even if you do not make any money on your investment. If you are able to make the monthly payments, then i would just put that toward your investment each month. You also have to remember that with a loan you have interest and that mean part of your profit will be going to pay for that, and not in your pocket.
Post Fri May 14, 2010 12:49 am
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calbeach
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I agree. Making a loan for investment is very risky. However, we need to take the risk in order to prosper. Man did not reach the moon if fear was considered. Smile
Post Wed May 19, 2010 8:54 am
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david1987
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Definitely, its a human nature.
but a person who want to go ahead in their life take some risky decisions.
& many time I see that they are successful in life.
Post Fri May 21, 2010 10:00 am
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jason_simpson
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Borrowing to invest can magnify losses as well as gains.

It is also important that the investor be aware of the terms of a loan secured by investment funds. The lender may require that the loan be repaid at any time. If the borrower does not have cash available, the borrower must sell investment funds, possibly at a loss to provide money to reduce the loan.
Post Fri May 21, 2010 4:34 pm
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crates
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Re: Getting loan and investing - smart or stupid?  Reply with quote  

quote:
Originally posted by Day Trader
What do you think about getting a loan from the bank in order to invest in a GROWTH related Mutual Fund with potentially above average returns?


It's a horrible idea. Unless you're an advanced level investor, leveraging to invest rarely pays off. Mutual funds rarely show highly above average growth in particular. It's just asking for trouble.

If you know more about getting discount real estate or how to invest the money yourself, it would make more sense.
Post Mon May 30, 2011 4:15 pm
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oldguy
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quote:
Originally posted by Day Trader
What do you think about getting a loan from the bank in order to invest in a GROWTH related Mutual Fund with potentially above average returns?


It would be fun to know how Day Trader has done since 2005.

I don't consider it to be a 'horrible' idea, I have been doing it for over 35 years - borrowing against my rental houses and investing in stocks. In my own case it has been a very successful concept. But you need to do the math, do a risk evaluation, plan your risk mitigation techniques.
Post Mon May 30, 2011 5:12 pm
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littleroc02us
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Bad idea! Very risky! If you can't afford to put your own money into investments like Mutual funds, borrowing can only be a risky manuver. You have to figure in risk as a calculation because if things go bad how will you make the loan payment? Always think of the worse case scenario when borrowing money. When you pay in cash there isn't any risk, but when you borrow it's hard to sleep at night.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue May 31, 2011 2:46 pm
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jennypaul
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I also agr4ee with you littleroc02us. this may be a bad and risky idea. If someone is borrowing money for investing that money in any risky place. He may face any big financial problem in this situation.
Post Wed Jun 01, 2011 12:53 pm
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johntikolo
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Making a loan for investment is very good and smart thought. I think many payday companies gives you loans for your business and investment also.
Post Fri Jun 03, 2011 6:00 am
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soybean
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quote:
Originally posted by johntikolo
Making a loan for investment is very good and smart thought. I think many payday companies gives you loans for your business and investment also.
Uh huh, and at what interest rate? Wink
Post Thu Jun 30, 2011 12:29 am
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