Leverage in your investments...

[dork32]

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

already say 3.25% on car is actually 6 to 7%. but if you can get 10% then you can get back the cost. The 3.25% is to bluff people into the loan, thinking that it is cheap.

 

[wahkao3]

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.

those good TA+FA stocks can easily give 10%
like valuetronics

TA good
FA good
Both say buy, can buy
those good company i will decorate the chart a bit. nice or not?

 

[wahkao3]

already say 3.25% on car is actually 6 to 7%. but if you can get 10% then you can get back the cost. The 3.25% is to bluff people into the loan, thinking that it is cheap.

black and white write 3.25% leh

UOB big reputation bank leh. how can they bluff ppl into taking the loan? surely they dont have to resort to this kind of financial engineering to bluff ppl to sign their loan?

 

[dork32]

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.

this is not the worst thing to do. home interest rate has been below 2% for many years already. If you have done this for the pass 7 years, you have made a tidy sum.

dividend stocks pays steady dividends. in that aspect it is quite safe.

the main problem is interest rates and stock market usually move in opposite direction. in other words interest rates rise, stock market will fall. you will get hit on two sides simultaneously.

 

[Mecisteus]

black and white write 3.25% leh

UOB big reputation bank leh. how can they bluff ppl into taking the loan? surely they dont have to resort to this kind of financial engineering to bluff ppl to sign their loan?

car loan has a special calculation so the pa rate there is misleading. if i recall, the effective IR is much higher.

i dont own or will never own a car so i didnt bother to understand the calculation.

 

[dork32]

black and white write 3.25% leh

UOB big reputation bank leh. how can they bluff ppl into taking the loan? surely they dont have to resort to this kind of financial engineering to bluff ppl to sign their loan?

let me teach you maths lah
if u take 100 k loan for 5 years to buy car
total interest = 100 k * 5 *0.0325 = 16250
means you have to pay back 116 250
divide that by 60 months = 1937.5/mth
Type this into MS Excel =RATE(60,1937.5,-100000,0,1)*12
you get 6.31%.

You can do the same thing for the rest of the years.

Not bad. I can teach the expert on FATA maths man!

 

[dork32]

all car loan works this way. not only uob bluff people, all other finance company, banks also calculate this way.

 

[dork32]

uob not trying to bluff you. if you go to their website on car loan, you can see exactly the 6.31% effective rate published.

 

[Aneosx]

let me teach you maths lah
if u take 100 k loan for 5 years to buy car
total interest = 100 k * 5 *0.0325 = 16250
means you have to pay back 116 250
divide that by 60 months = 1937.5/mth
Type this into MS Excel =RATE(60,1937.5,-100000,0,1)*12
you get 6.31%.

You can do the same thing for the rest of the years.

Not bad. I can teach the expert on FATA maths man!

You can be Grand-FATA Master liao

 

[wahkao3]

let me teach you maths lah
if u take 100 k loan for 5 years to buy car
total interest = 100 k * 5 *0.0325 = 16250
means you have to pay back 116 250
divide that by 60 months = 1937.5/mth
Type this into MS Excel =RATE(60,1937.5,-100000,0,1)*12
you get 6.31%.

You can do the same thing for the rest of the years.

Not bad. I can teach the expert on FATA maths man!

walao why must they calculate like that sia. so deceptive
cannot use the normal method meh?

 

[dork32]

You can be Grand-FATA Master liao

my fata skills is seriously lousy. very often I am saddled with heavy paper losses for many years. always seems to go in at the wrong time. but I always buy stocks that gives dividend. at least I can bluff myself that the share still give some dividend though I am on a paper loss. if I can hold it long enuf, the share price will rebound and I do make a bit in the end.

I have a lot to learn from the rest of the forum as well.

 

[wahkao3]

my fata skills is seriously lousy. very often I am saddled with heavy paper losses for many years. always seems to go in at the wrong time. but I always buy stocks that gives dividend. at least I can bluff myself that the share still give some dividend though I am on a paper loss. if I can hold it long enuf, the share price will rebound and I do make a bit in the end.

I have a lot to learn from the rest of the forum as well.

can show your equity curve or not?

 

[Mecisteus]

walao why must they calculate like that sia. so deceptive
cannot use the normal method meh?

yes it is deceptive.

usually for housing loans, the effective IR is the same as loan rate pa. the interest payable for a particular month will be based on the principal balance of that month.

from the car loan calculation above, i can see that the interest payable is already calculated upfront for the next number of years of loan period. thats why the effective IR > loan rate pa if you list out the cashflows.

no wonder its not worth to pay off your car loan early if you are already into a loan. you wont save on interests. worst thing, your effective IR will shoot up.

bottom line is, always look at the effective IR.

 

[allways]

walao why must they calculate like that sia. so deceptive
cannot use the normal method meh?

If they mentioned 3.25% per annum then it's deceptive. Most likely they will say 3.25% flat. Anyway, they are required to disclose the effective rate which is much higher.

 

[Mecisteus]

If they mentioned 3.25% per annum then it's deceptive. Most likely they will say 3.25% flat. Anyway, they are required to disclose the effective rate which is much higher.

it did mention per annum. see the picture in the previous page.

but in a way, UOB is right also. the per annum rate doesnt mean anything. the way the payments and timings are to be made that matter. ie interests payable on principal balance, interests payable upfront, interests payable on maturity, etc.

 

[peterchan75]

Back to the topic of leverage. If one can turn a $10K capital to 50K and to 100K then it's wise to leverage to the hilt. For a struggling trader who barely scrape some profit and barely keep up with the index, it's not worth doing it. Leverage doesn't improve trading performance. It amplifies.

 

[bbq_squid]

is it possible to use currency carry trade for leverage?

 

[SpeedingBullet]

is it possible to use currency carry trade for leverage?

Meaning? Borrowing yen to buy aussie at 1000x? Or borrowing yen to buy other assets? (Using yen as example)

 

[Futureskid]

is it possible to use currency carry trade for leverage?

Yes u can..

 

[RM2SSG]

I am currently thinking seriously about leveraging.

Here is the scenario I am working on. All comments welcome.

Allianz Income and Growth Fund SGD pays about 8% pa. This fund has been fairly consistent in paying this level of dividend monthly. Currently the rate is S$0.075/unit per month and has been like this since Sept 2013. Current NAV is $10.6 so that works out to be around 8.5% pa.

If I put in 100K, my dividend pa is 8% as per what the fund is performing.

If I do a 1:1 leverage, my investible amount is now 200K, minus OD fees (of say 2%), the IRR (over 3 years) is estimated to be at 14.67% pa. after minus off the OD fees.

The assumption is that the NAV remained the same.

My risks are:

1. OD rate jumped - but if I track it very tightly, I can get out before it is too late
2. The fund is SGD hedged, so I do carry currency risk
3. The fund focused on US market, so my market risk is in the US
4. NAV dropped significantly - this I can track and get out before too late
5. Dividend dropped significantly - if this happened gradually I still have time to get out

So effectively I am leveraging on 2% (of OD) to get about 6.67% extra yield.

Sounds too good to be true isn't it?