Leverage in your investments...

[Keverus]

who here use leverage to fund investments?

what kind of leverage do u use?

can share share?

 

[wahkao3]

dont pay car loan, instead use the money to invest counted or not?

car loan only 3.25%. Invest in dividend paying stock of 4% already earn back cost of capital

do you see what i see?

 

[alexchia01]

dont pay car loan, instead use the money to invest counted or not?

car loan only 3.25%. Invest in dividend paying stock of 4% already earn back cost of capital

do you see what i see?

Do you know how car loan work or not?

If you don't pay, they come to repossess your car.

Your loss is 100%, plus whole lots of problems.

 

[Boorseye]

who here use leverage to fund investments?

what kind of leverage do u use?

can share share?

I was looking at OCBC securities.. They have share financing account, 3.5% p.a for grade 1 shares i.e STI components. The thing I not sure is that if there are any other charges that will be incurred for example, to transfer the shares to your own CDP account after you've paid up and if you'll be able to received dividends.. Anyone here using OCBC share financing account?

 

[sgbanking]

2.5% p.a. 6month fund transfer from Maybank CreditAble.

 

[Shiny Things]

who here use leverage to fund investments?

what kind of leverage do u use?

Yep. IBKR's portfolio margin lending charges me 1.0%-1.5% on USD and SGD margin balances. I'm not using it too much at the moment, though, because I think the whole chase for yield thing has gone a bit nuts.

Here's an example. Let's say you leverage up at 1.5% to buy JNK, a junk-bond ETF that yields 5.5%. Great, 4% "for free". But JNK can easily drop 4% in a year and wipe out your excess gains - and junk-bonds tend to default at around 2-3% per year, so you need to take that into account as well. It doesn't take much, especially at current yields, to wipe out the leverage gains and leave you in an even worse shape than you would have been in if you were unleveraged.

 

[SpeedingBullet]

Keep calm and carry on

 

[dork32]

dont pay car loan, instead use the money to invest counted or not?

car loan only 3.25%. Invest in dividend paying stock of 4% already earn back cost of capital

do you see what i see?

your maths got some problem. 3.25% effective interest is 6 to 7%. Dividend stock that pays you 4% cannot earn back cost of capital.

 

[dork32]

To me housing loan is much better than car loan.

my fren did this.

Sold old flat and end up with 400k (200k CPF + 200 k cash)
Buy new house for 500k.
Downpayment 100+k.
loan 400k
Interest rate 1.4% (effective and fixed for 3 years)
300k hoot dividend stocks.
300k * 4% > 400k * 1.3%

 

[dork32]

To me housing loan is much better than car loan.

my fren did this.

Sold old flat and end up with 400k (200k CPF + 200 k cash)
Buy new house for 500k.
Downpayment 100+k.
loan 400k
Interest rate 1.4% (effective and fixed for 3 years)
300k hoot dividend stocks.
300k * 4% > 400k * 1.3%

better be careful if you are thinking of doing this:

if interest rates rise, eg 5%
then your dividend may not cover the interest.
you want to sell your stocks to pay up the principal because bo hua already
but you realize share price would have dropped due to increase in interest rates.
then it is double whammy. you will be in some trouble.

 

[kelvin_99]

better be careful if you are thinking of doing this:

if interest rates rise, eg 5%
then your dividend may not cover the interest.
you want to sell your stocks to pay up the principal because bo hua already
but you realize share price would have dropped due to increase in interest rates.
then it is double whammy. you will be in some trouble.

Has he also considered the scenario where stock prices drops to the point where it wipes off the dividend earned?

 

[Mecisteus]

To me housing loan is much better than car loan.

my fren did this.

Sold old flat and end up with 400k (200k CPF + 200 k cash)
Buy new house for 500k.
Downpayment 100+k.
loan 400k
Interest rate 1.4% (effective and fixed for 3 years)
300k hoot dividend stocks.
300k * 4% > 400k * 1.3%

this is the worst thing to do.

its ok if your friend is downgrading and locking his profits. now he is facing both interest rate and market risks.

rising interest rate is not necessarily bad for stocks. interest rates can remain low but a new financial crisis appears.

 

[sanjaynblr]

Leverage is a double edged sword. You win big, you loose big too. If you are disciplined and smart enough, get investments which have a positive winning ratio, over a period of time it money grows exponentially.

 

[alexchia01]

who here use leverage to fund investments?

what kind of leverage do u use?

can share share?

Trading then you want to leverage.

For investing, you want to buy what you can afford and not leverage.

 

[wahkao3]

your maths got some problem. 3.25% effective interest is 6 to 7%. Dividend stock that pays you 4% cannot earn back cost of capital.

then go for growth stock
stock market can easily get 10% per year

pay 3.25% interest, get back 10%. Ok mah worth it. Earn back cost of captial

 

[Aneosx]

then go for growth stock
stock market can easily get 10% per year

pay 3.25% interest, get back 10%. Ok mah worth it. Earn back cost of captial

i also know how to say this..

you say stock market can easily get 10%, than u list down the stocks which can guarantee 10% per year. Use your self proclaim FATA method if needed.

If you cannot list down, please do not talk so much, Captain Obvious..

 

[wahkao3]

i also know how to say this..

you say stock market can easily get 10%, than u list down the stocks which can guarantee 10% per year. Use your self proclaim FATA method if needed.

If you cannot list down, please do not talk so much, Captain Obvious..

there is no guarantee in life. The only 2 things that are guaranteed are death and taxes.

i also never say the 10% is guarantee. Dont twist my words leh

 

[Aneosx]

there is no guarantee in life. The only 2 things that are guaranteed are death and taxes.

i also never say the 10% is guarantee. Dont twist my words leh

You said this "stock market can easily get 10% per year"

I didnt really twist your words, this is what my interpretation of what you said. To me, that means that if i follow your advice, i can close one eye and make 10% per year. Isint that almost close to "guarantee"?

What you say or anyone else said might influence somebody else to follow your advice. If he makes money, than its ok, no problem. What if he ended up losing money because he follow your advice? Have you ever thought of this?

Ok, back to main topic, list down the stocks which you think can EASILY give 10% returns per year.

 

[Futureskid]

Leverage is good... U should always leverage when financing cost is lower than your cash or investment returns yield...

 

[SpeedingBullet]

Leverage is good... U should always leverage when financing cost is lower than your cash or investment returns yield...

Yup, leverage is what creates billionaires, but manage the risk wrongly and it's what decimates LTCM & Lehman. Double-edged sword.