Finally, I decided it: I'll get a loan on my home (mortgage) to invest!

Discussion in 'Professional Trading' started by crgarcia, Apr 15, 2009.

  1. I'll get a loan (mortgage) on my home (already paid in full), to invest.

    25% short term T-Bonds, T-Bond funds or money market. I got this idea from Benjamin Graham' The intelligent investor.
    75% DDM (2x Dow Jones)

    With that 25% in cash, I can pay out some years worth of interests, even if the market goes against me.

    Don't even wake me up for at least 2-3 years (unless the Dow were at 12,000)
  2. good luck with that.

  3. with over 2500 posts I thought you'd be smarter then that!
  4. So you get out of the fire and want to get back in? :confused:

  5. nkhoi

    nkhoi Moderator

    now you are thinking instead of following the mantra 'Stay Out of Debt' mindlessly.
  6. It's OK to get debt to invest.
    Be it in a business or undervalued stocks.
  7. Get debt to invest is a bad idea in general. But... in a bull stock market while the interest rate is relatively low, some can profit handsomely with that leverage. However, we are not in a bull market. So this strategy may be questionable.

    As long as your profit can cover your expenses, then you are okay.

    Minus: you need to pay mortgage interest and have obligation to make monthly payments.
    Plus: the mortgage interest may help you reduce some taxable income if you use itemized deduction.
    Minus: the interest you make from the T-bills, you need to pay income tax on it.

    If your timing is bad and the market goes way against you... it would be so much harder to dig yourself out of the hole. Not only you have lost money... you risk losing your home...
  8. there's nothing wrong with borrowing money at low-interest to invest in something that pays higher returns, but putting 75% into a 2x ETF is nuts.
  9. Hester



    I got a mortgage on my house to invest in the market.

    Say that out loud five times and tell me it doesnt sound at least a little stupid.
  10. Take a mortgage on a house to trade is okay - if you know what you are doing.

    Take a mortgage on a house to invest. I think that is bad.

    It depends on your start-point/end-point. If you mortgage your house in beginning of 2008 to "invest". The broad market had been down more than 40%. A lot of mutual funds had been down 40%. It's likely your own picks might have been down 40%. (Or more if you invested in bank stocks.)

    You get a double whammy.

    People only get away with it in very bullish markets (like 1995 - 2000).
    #10     Apr 16, 2009