Would you BORROW money to invest it in the stock market?

[UdoKier]

Do you know of ANY financial advisor who would tell you to do this?

And yet that is what Bush is proposing we do - borrow a ton of money (on top of the mountains of debt we already have) to gamble in the stock market.

Why is this idea being treated by ANY media as anything short of sheer lunacy? WHenever I hear talking heads talking about this scheme with a straight, face, I feel as though my head will explode.

[catzies]

1. I worry for people who did it when theyrefinanced and cashed out

and then put that money to work in the stock market, trying to play both ends. :shrug:

[ultraist]

2. Excellent point!

There is no way I would borrow money to invest in stocks unless I had a very savvy broker that was confident that the interest I would pay on the borrowed money would pale in comparison the the highly probable profit I would make off of the stocks. It would have to be a very calculated risk.

Sometimes it is well worth taking out loans to make investments but you must be pretty certain that the investment will more than pay for the interest, leaving a profit.

[Journeyman]

3. Oh, this was *real popular* back in the '20s . . .

made a lot of people a lot of money on paper, then got flushed away when the big economic engine took that decade-long dump.

[ultraist]

6. Stocks are very iffy that way

You cut the risk somewhat by making it a short term investment---cash out before a crash or market change. BUT, short term investments yield lower profits.

What are the terms they are offering on this Social Security investment plan? Can you cash out anytime?

[BrotherBuzz]

11. Not just flushed away...People ended up owing money

when the broker got them to invest on the margin. 10% down translated to people buying ten times what people could afford. Jeez louise a ten-thousand dollar investment could become a ninety-thousand dollar liability; lose all your money and still owe a lot more. No wonder people jumped out of windows.

[Bozita]

4. That's what a lot of the home re-financing is all about

Home increased in value? Hey, you made a good investment.

Obviously, you understand money!

Now if you take out a new mortgage based upon current value, you could invest in the market and make a real killing.

Trust me.

[ultraist]

7. It depends on your property appreciation rates and the terms of your loan

If you have low property appreciation rates and a low interest loan with no points (fees), it may be worth looking at. It's not ALWAYS a better deal to suck the equity out of property you own and invest in stocks. There are a lot of variables to consider including the risk of the stocks.

[FloridaPat]

5. Yes. I did this. Did real good for a year. Then lost everything.

And I know a lot of people that did it too.

[ultraist]

8. My father in law lost a boat load of money in stocks

He THOUGHT he knew what he was doing, but apparently he didn't. It's not always wise to spend your property equity. How much extra are you having to pay in interest not having that property paid off? Some people don't even consider this. Paying off a property saves A LOT of money in interest payments.

[CindyDale]

9. Yes, I know someone who refinanced and lost almost all of it

She said her house would be paid off by now if she hadn't.

[UdoKier]

10. Here's a better question:

Knowing the debt would be left behind for your kids, and that if the market were to crash, your kids would be bankrupt, would you just say "Ah, well - fuck'em, I'll be dead by then anyway!"

[Historic NY]

12. I've often thought about it...but then the sensible side of me took over..

I just increased what I put away in savings each week...at least I know I'm not losing it. We are able to have sums automatically deducted and put into whatever banks we chose. I did take out a home equity loan (modest) to do things or buy things I want. Bought 2 vehicles and put up a garage for my collectible cars & some work on the house. I owe very little & have the advantage of deducting the interest I paid.

I should have mentioned I have no mortgage for my house.

[anarchy1999]

13. What about the people that took out home equity loans so they could

go see "their team" at the "Superbowl". I find that to be incredibly more disturbing! That is the definition of "sheer LUNACY" in my dictionary. Yours comes in second. Borrow on your home to invest in the stock market and pay off your "debt".

Don't spend too much time thinking on it, you can lose brain cells and explosion in one way or other is a strong possibility. Just stand strong, proud and tall in knowing that just maybe, you might be one of the smart ones, saying """WHHAAAT""?? Or in simplar terms, WTF!?

[RaleighNCDUer]

14. Isn't that what kicked off the crash in '29? nt

[FloridaPat]

22. There were lots of things. One big problem was you could buy stocks

with 10% down. It's amazing how much you can owe when you using the brokers money - called margin. The companies had too much product to sell. Sort of like another Enron deal. Things looked good on paper, but it got to the point where it couldn't be sustained. Some people say the Depression happened several years before the market crashed.

But back to borrowing from a broker. You can go broke real fast that way. Even today it's 50% and you can go broke real fast at that amount. So you can imagine what 10% did to a portfolio. The worst words int he world of finance is "margin call". And it's really wierd the way it works. I've gotten them. Money dissappears real fast.

[Eric J in MN]

15. Good point. I never though of it that way (nt)

nt

[RaleighNCDUer]

16. * says in his stump speech that you won't be able to take your

'personal account' and gamble it.

That's the government's job.

[SeveneightyWhoa]

17. Actually, yes.

I read an article somewhere a few days ago talking about how Canadians SHOULD do this to take advantage of a positive-looking stock market..

[Extend a Hand]

18. I wouldn't do it -- but it seems to be quite common

To learn more about buying mutual funds on margin, call Charles Schwab & Co. at [phone] and ask for a free booklet called A Guide to Investing. Or write for the booklet to Charles Schwab & Co., 101 Montgomery Street, San Francisco, CA 94104.

Schwab currently allows investors to borrow up to $1 for every dollar of their own money they invest. That means you can invest $5,000 and purchase up to $10,000 of funds. In a bull market, that can let you nearly double your return on a $5,000 investment. But in a bear market, your losses can double, too. Because our bond fund model generates frequent trades, we do not recommend using it to time bond funds on margin.

[newyawker99]

19. Hi sad_one!!

Welcome to DU!! :toast:

[seabeyond]

20. i wont even use my own f*in money in stocks today n/t

[LynnTheDem]

21. No. But then, I'm not a stupid rightwingnut.

bush is a stupid rightwingnut.