Hi,

Lets say you have X money and you can borrow up to 3X money for 2.5% interest a year. You have to pay back whenever the lender wants (not immediately of course, but you get the point). Time frame would be like 1-4 years.

Would you borrow, how much would you borrow, and of course where would you invest it in? Of course your risk tolerance should(?) be lower if you borrow 3X than 1X etc.

Is this a recipe for disaster?

Thanks.

Learn the difference between lending and borrowing first

Apologies for my mistake. FMP. The reason I post this is because the interest rate is pretty low.

If you can survive that investment going to 0 without ruin then it's +EV assuming you just index the money

It sounds like you are mentioning deferred payment loans or convertible loans. Your question about how much is dependent on a persons situation. There is more to investing than money. Personally with what I know and my situation, I would borrow 500k and spiral that up to 1.3M through matching govt money.

leverage is not necessarily a bad thing, you just have to realize that losses and gains are amplified and you are increasing your risk of ruin (vs. unlevered) by applying it...risk parity portfolios employ it AQR and these Yale Prof's link support leveraged lifecycle investing...with that said if you need the money next year, leveraging a 100% equity portfolio is pure gambling...

Thanks for replies. Most likely time frame is longer than 1 year, but not by long, for example only 2-3 years...

The link makes assumptions that people live to a 100. (And also encourages being in the office until then). This statement alone shows that the article does not consider other more positive viewpoints and is more of a justification of how the author has invested.

"Back in 2008, we weren’t sure if Samuelson-at 93 years old-was still active, but were happy to learn that he was still regularly coming into his office."

The Yale professors are absolutely correct in that article and people should take gambles. We both know that decisions whether 50 or 500 is invested have far less to do with both sides best interests and is more about perception.

You should want a windfall within 18 months. Anything else is an outdated system or bad investment.

Negotiate a 4 year term, look for a 4 year bond that yields > 2.5% interest

Also, sounds like a friends/family sort of loan? Avoid at all costs if this is the case.

This is indeed correct. Therefore I was/am looking for a very low risk, so I will be able to pay back 100% of the time. Thanks for the advice.

Yeah avoid the family and friends thingy. It is better to spend the 1x money you have. Investing slightly better than the interest rate of a loan is the nut low in investing.

Hehe ok, thanks for advice .

Figure out what you'd do with the money and then that will tell you whether it's a +EV investment or not...

Personally, I can generate 25% on my portfolio, so I'd happily borrow money at those rates...and I'd borrow as much as I could put to use. But, you need to ensure that YOU can put the money to use and that you can safely generate reasonable returns.

Sounds like total BS to me, sorry.

Every time the forum switches into this kind of mode (how much should I leverage/borrow to invest) I just fear another correction/bubble is coming.

Same thing goes with the bogleheads forum. Every time I see a bunch of threads about "100% in stock allocation" I start to get nervous.

Too bad I don't believe in market timing (even if I do think I have an edge, no way my edge is big enough to overcome the tax man)....hopefully I'm wrong but boy oh boy...feels like correction time

(for the record, I like the market going down because I get to buy more shares cheaper, but I HATE living through bubbles when they pop...it's simply no fun)

To ease your mind RikaKazak, me posting this thread now has nothing to do with how the market has been performing.

You don't need to be sorry...but it's not BS...not sure what about that is so surprising...

I build and flip houses for a living, and typically generate about 15% cash on cash returns in 3-4 months on a flip project or about 30% cash on cash returns in 8-12 months on a new construction project. Annualized, that's about 40-60% returns, and if you account for the periods between investments and business overhead, over the past 5 years, I've seen between 25-30% actual annual returns (pre-tax) on my portfolio.

I've been pretty transparent about my financials for the past 6 years (though I stopped updating the page earlier this year when I got too busy):

http://www.123flip.com/results-to-date/

obviously OP was referring to passive investments not your day to day grind

Your 1 post isn't alarming. Your post + another post on a forum I frequent + 2 posts on bogleheads about being 100% stocks = worried.

Also I highly doubt if this was 2008-2009 and the dow was down 300+ points all the time you'd be asking this question because you'd be "afraid of the downside."

When people worry about the downside, I don't worry. When people don't worry, I worry.

But realistically I shouldn't worry, since even if I "knew" I was correct it wouldn't change my investments at all. But that's one thing I wish I could change about myself, stop being such a worry wart.

Ah yes, my 10 hour per week grind...

When you learn how to automate a business, you'd be surprised how little you have to work...

And why would you assume the OP would only consider passive investments? If he can borrow $500-$1M and generate 20-30% returns on it (with an active investment strategy or business implementation), he may find that he can earn a good bit more than whatever he's earning at his 9-5...

I don't think these figures are unrealistic in something like construction because someone who knows how to the keep cost of sales down and maximize production can have large margins. There's usually a going rate for a given product/service and most competitors in the market don't grind that hard to get the best pricing on materials or keep job costs & cycle time to a minimum.

If you're not getting at minimum ~8% net in one of these businesses it may not be worth the effort and/or risk.

I don't think this is unreasonable, either. If you've hired the right people and know how to take advantage of technology (remote desktop, cloud computing, etc.) you shouldn't have to dedicate a bunch of time to work.

recipe for disaster

A 1-4 year time frame is too short to guarantee a positive return and you could easily lose money.

Also not enough info provided.....

What's your age, overall goal and your financial situation?

No it's not:
http://www.blme.com/index.php?page=p...eposit-account

2.75% 4 year fixed bond

How much are you making per year with your 10 hour work week? I saw your post with your results on your website but can't really put together your total profits...If your flipping one house at a time I could see 10 hours being a fair estimate, but if your involved in new construction/multiple flips that doesn't seem realistic.