Late start on a Vanguard fund

[Anonymous No.789848]

I've been delayed buying my Vanguard fund buy a couple of years because I had a great real estate opportunity present itself.
I want to catch up for lost time and one possibility was to make use of a margin loan at 6.13%. I can leverage at a rate of 75% up to 20k.
As returns average roughly around 10% with dividends reinvested would this be free money at 3.87%?
Not to mention the interest would be completely tax deductible.
The only risk I can foresee is the market tumbles and there's a margin call which I could top up with my emergency fund.

Poke holes in me, please.

[Anonymous No.789904]

[Anonymous No.789994]

>>789904
Thanks for all your help /biz/.
It's been real.

[Anonymous No.790028]

>>789848
>The only risk I can foresee is the market tumbles and there's a margin call which I could top up with my emergency fund.

Sounds like you have it figured out.

>Not to mention the interest would be completely tax deductible.
triple check that though

[Anonymous No.790070]

Monumentally stupid idea. Borrowing at 7% to hopefully earn 10% (which is a long-term average, not really applicable here)? Risking you emergency fund? Using leverage in what is supposed to be a long-term wealth accumulation portfolio? This has cautionary tale written all over it.

[Anonymous No.790526]

>>790070
You've said its stupid, however, this IS for a long term investment.
One that I would be making regular payments to to maximize the leverage and to reduce the risk up to the point where the leverage is much lower, ie 20% and to a maximum of 20k. Which in turn would obviously reduce the risk of a margin call and less risk of using my emergency fund.
It's riskiest only in the immediate future.
Still a dumb idea?

[Anonymous No.790535]

>>790526
>Still a dumb idea?
Yes, because the spread is too thin. There's nothing wrong with taking risk, as long as you are adequately compensated for that risk.

If you have free cashflow to pay down a margin loan, then you have free cash flow to buy into the market free and clear -- without risking your other assets.

And what if that free cashflow disappears. You can be fired. You can be injured. You can be called upon to use your emergency fund for any of the many purposes for which it was created in the first place. Why even have an emergency fund if you're going to expose it to market risk? That defeats the purpose entirely.

Look, I can't predict how this would turn out (and neither can you) because no one can predict the market's future directions. But it does seem like a lot of risk for a very thin reward. And that's the textbook definition of a bad investment.

[Anonymous No.790555]

>>790535
I'm intending to buy into the market free and clear but supplement it with the margin loan, where the degree of risk reduces rapidly.

As far as losing cash flow, I have a pretty stable job and I'm insured up to the eyeballs. Trauma, injury, income protection, private health, etc. so my emergency fund isn't that important.
Which I might add is $17000. For me to lose all that it would have to be the end of days.

Still a dumb idea?

[Anonymous No.790565]

>>790555
Its a really dumb idea for all the reasons the other guy stated. You don't use margin for long-term investment. The risk/reward is way out of balance. Also, how long can you lock in that borrowing rate? Inevitably, interest rates are going to rise from these historically low levels and your expected spread is going to get awfully narrow. And if interest rates do rise faster than expected, the market is going to react negatively and that will lead to a margin call for you pretty quick.

[Anonymous No.790575]

>>790565
I'm hoping to get a fixed rate at 5.49% for 1 year. Which will give me a chance to invest around 10k-15k.
As far as margin calls go, they only ask you to buy more shares which is what I'd do if the market collapsed anyway.

[Anonymous No.790600]

>>790575
Well, its your money.

[Anonymous No.790631]

>>790555
>free and clear
>margin loan
You're either not using the words correctly or don't understand the concepts. Margin loans are secured by the assets in your investment account. Buying on margin is the exact /opposite/ of buying free and clear.

[Anonymous No.790650]

>>790631
I knew as soon as I pressed post. Should have deleted it.
What I should have said was after I've contributed to it over a fixed interest year there will always be a portion, (say 50%) not used as collateral. At no point would I use the full 75% leverage. Maybe at the start for the first few thousand.

[Anonymous No.790664]

>>789848
>I want to catch up for lost time and one possibility was to make use of a margin loan at 6.13%.
>As returns average roughly around 10% with dividends reinvested would this be free money at 3.87%?
>The only risk I can foresee is the market tumbles and there's a margin call which I could top up with my emergency fund.

[Anonymous No.790679]

>>790664
I haven't been around here long enough to know what Luigi represents. Something bad no doubt.
If you're trying to make out the a market correction is a bad thing I would only see a margin call as an opportunity to top up at a discount.

[Anonymous No.790680]

>>790679
>Using your emergency fund in a global economic turndown

[Anonymous No.790862]

Clearly this is not a popular idea.
Everyone seems to be stuck around the problems with an emergency fund and its use as a bail out.
Hypothetically what if I had cash reserves?
Also is there any % of a portfolio that would be acceptable for you all to leverage off given that it remains at a fixed low rate?

[Anonymous No.790866]

>>790862
If you had cash reserves then you should just invest those and earn a full 10% long-term return. You're really reaching to try to justify this now.

And its not really the % of the portfolio thats the issue; its that your "low" rate isn't really that low. Your spread is still really narrow..

Look, millions of people could in theory do what you're proposing and for a lot cheaper. Home equity rates are far lower than what you're quoting. If it made sense, all us homeowners would be taking on second mortgages to buy stocks. But no one does that. Ask yourself why.

[Anonymous No.790869]

Just invest in financials and take out more and more loans, you'll fuel each other that way and it is sure to win :^)

[Anonymous No.790876]

>>790866
How did my comment try and justify anything? I'm merely pointing out the hang ups people seem to have about this idea. There's no alternative thinking, it's just "no, you're dumb".
As far as the interest rates go, my country didn't fall to shit in the GFC, so these rates are reasonable.

[Anonymous No.790904]

>>790876
>There's no alternative thinking, it's just "no, you're dumb".
What the hell are you talking about? I've written several details posts explaining in detail the reasons why this is a mistake. Yes I called it dumb, but I made sure to explain why its dumb so you could learn something.

Now you're just becoming a defensive faggot, lashing out because no one agrees with your idiotic scheme. This is tiresome. Do whatever you want. At the end of the day, no one really cares but you.

[Anonymous No.790936]

>>790904

Lashing out?
I'm being defensive because you're being aggressive fuck knuckle.

Your "detailed" posts have been a majority of how I shouldn't use my emergency fund or any other fund to bail out a leveraged position no matter the size even if it means contributing to the portfolio with more shares at a crash price. You sound like a fuckhead. The "risk" isn't much of a risk. My emergency fund whether I need it or not (insurance) is a non-issue.
Fuck off and let someone constructive have some input.

[Anonymous No.790943]

>>790936
Yeah, funny thing is ... every person who's commented (at least 5 different anons) thinks your plan is stupid and that your retarded. I was at least polite about it.

Fuck off poorfag.

[Anonymous No.790952]

>>790943
Ahahahaha, after all your constructive "advice", I'm the poor fag? Talk to me when you've quit renting fuckface or don't your parents charge you to live in their basement?
I count 3 others, one rightly concerned with rate hikes (constructive), and 2 little faggots carrying on about emergency funds.

[Anonymous No.790959]

>>790952
>Talk to me when you've quit renting fuckface or don't your parents charge you to live in their basement?
Ok. kek.

[Anonymous No.790969]

>>790959
AHAHAHAHA!!!!
Fuck. Off.
Do you seriously expect people to believe that's yours? You speak like a fucking high school kid.
You've either
A) stolen a screen shot off someone
(Probably the easiest to do on this forum)
B) inherited ALL of it.
(BECAUSE YOU'RE A DENSE MOTHERFUCKER)

[iHaz !MILLiOnz/Q No.790985]

>>790969
Sorry to bust your bubble kid. Its ok, your reaction is pretty common among the plebs. Welcome to /biz/ newfag.

https://archive.moe/biz/thread/301031

[Anonymous No.790990]

>>790959
I love all the multi-millionaires on /biz/

[Anonymous No.790991]

>As returns average roughly around 10% with dividends reinvested

A 10% average nominal return has only been true over very, very long periods of time. Valuations are well above average right now, so you might have to wait until you are an old fuck (50+ years) before you get that 9-10% return. This also assumes inflation doesn't fuck you in the ass and you have enough cash to avoid a margin call during a full market crash of 50+%. And if you did, why wouldn't you be investing that massive amount of cash instead of taking out a margin loan?

Consider 1901-1932. With dividends reinvested, you'd have gotten about 4% nominal annualized over 30 years. Even as late as 1949, you would have received only 6.8% per year.

In 1966-1982 you would have gotten a nominal 5.3% annualized, but with inflation above that rate, your inflation-adjusted return would have been negative 1.5% per year for 16 years (losing over 20% of the real value of the initial lump sum), not even considering the likely massive hikes in your loan rate during a high inflation period.

In short: this is a retarded plan. If things go wrong, it will go very wrong for you, and unlike, say, a risky individual stock that could become a tenbagger, the potential rewards aren't high enough to justify the risk you would take here.

[iHaz !MILLiOnz/Q No.790993]

>>790990
Just the one so far. I've waiting a year for company to arrive.

>It's like hitting the level cap in a MMO while everyone else in the game is stuck in the noobie zone.

[Anonymous No.790996]

>>790991
Thanks man. You sound like the kind of guy that has $11,233,197.90 in his Vanguard fund.

[Anonymous No.790999]

>>790993
You're such a fucking loser.
>50 years old
>Noobie zone.
I'm so embarrassed for you that you need validation from anons. Get a fucking life. Poorfag.

[iHaz !MILLiOnz/Q No.791002]

>>790999
Not 50. Another mistake you've made. One in a long string, I'm sure.

But thanks for reading my thread, newfag. Next time you'll know to respect your betters and not say stupid stuff like >>790952.

[Anonymous No.791017]

>>791002
Holy shit. Please stop. I'm cringing so badly.
Your comments are like a cheese grater on my eye balls.
Seriously, fuck off to your food stamps and welfare housing.

[sky No.791035]

>>791017
iHaz is legit

And how on earth did you get the 10% yield figure?

[Anonymous No.791052]

You dumb shit you don't use margin to "buy the market" you use margin to leverage positions in highly speculative investments that have a decent probability of returning far above the call money rate.

You're a speculator not an investor... And a dumb one at that. Enjoy getting fleeced.

[Anonymous No.791433]

>>791035
>iHaz is legit
You actually believe this crap?
Does he actually think he's a somebody?
Even if there was a multi-millionaire posting on these boards he wouldn't speak like a fucking child.
Let's say he is what he says he is, why would you listen to him? He's got more money than every poster combined and the best he can do is shit post on 4chan? What a pathetic fucking life. May as well kill yourself.
If that's what happens when you become filthy rich I'd rather be poor.

10% is a pretty well known long term figure.

[Anonymous No.791436]

>>791052
Cool sorry man. Now, how exactly would I be getting fleeced? Specifically.

Pin dick.

[Anonymous No.791437]

>>791433
Ihaz is a corporate lawyer who makes big bux

he is a loud proponent of "MUH VANGUARD FUNDS" and also

"MUH CANT BEAT THE MARKET"

He fails to see how people are better than him at something because he's a narcissist

[iHaz !MILLiOnz/Q No.791490]

>>791437
>Ihaz is a corporate lawyer who makes big bux
Yup.
>he is a loud proponent of "MUH VANGUARD FUNDS" and also
Yup.
>"MUH CANT BEAT THE MARKET"
I prefer the term "efficient market" but you're on a roll so I won't quibble.
>He fails to see how people are better than him at something because he's a narcissist
Aww, boo. Its not my fault that so many people on the board are young, inexperienced, and foolish. Sure, I guide with a stern and unforgiving hand, but I do so because I've been through the trenches and I know better. If anything, I'm paternalistic and condescending. At least get my faults correct.

[Anonymous No.791505]

>>791490
Shh. Leave now.

[Anonymous No.791579]

>>791505
>being this triggered
Get over it anon. I put on my pants one leg at a time.

[Anonymous No.791588]

>>791579
Shhhh, quiet now.

[Anonymous No.791607]

Gotta love /biz/ sometimes.
>OP pokes a bear
>bear rips off his head, shits down his neck
>OP spaghetti errywhere
Did I miss anything?

[Anonymous No.791622]

>>791607
>everything

[Anonymous No.791976]

rofl this OP

[sky No.792060]

>>791433
10% is a wobbly figure. Depends if you include 87
I'm assuming you're looking at the ASX accum index.
5year return is 7.8% (post gfc)
10year is 5.9% (inc gfc)
20year is 9.2% (post 87)
30 year is 7.7% (inc 87)

Also with the aussie yield curve steeping do you really want to margin lend into such an environment?

pic related: ASX 200 accum index post 87'

[Nickolas !lbJFGb4l2Q No.792091]

>>791490
Even if hes lying he seems to know what hes talking about, the duse starting the thread wasnt looking for advice he was looking for validation on his plan which hes not getting..

Ihaz you seem really knowledgeable, where can I speak to you one on one for some advice once and a while?

[Anonymous No.792101]

Unrelated to this guy related to vanguard, I'm 20 and just started making real money. Should I hold off on prepping for early retirement until after a market correction?

[Anonymous No.792133]

>>790526
There is literally no such thing as a long term margin trade
They can and will shut you down tomorrow if you can't post margin, and if there's an asset/market crash then they will call the loan in no matter how much collateral you have or how well the trade is doing

[Anonymous No.792135]

>>792101
just worry about getting your emergency fund up and good (most usually say 6 months of expenses) and a 401k.

once you got those two covered, it's fairly safe to start looking at other investents. i've got about anther 7 months before my emergency funds are where i want them.

[Anonymous No.792137]

>>792101
If anything, allocate more of your portfolio to cash than you normally would. If you have good credit, open a bunch of credit lines, start a business, abuse the low rates and know your bankruptcy laws. But waiting for the "right time" to invest is usually a disaster.

[Anonymous No.792157]

>>790959
lel.

>Right Click
>Inspect Element
>Change Contents
>Be Millionaire

[Anonymous No.792163]

>>789848
Im not usually a gay bear but google the word "grexit"

can you wait a few weeks to make this decision?

[Anonymous No.792235]

>>792137
My credit is 720 right now, pretty good right?

[iHaz !MILLiOnz/Q No.792389]

>>792091
I'm happy to reply to any reasonable question and I read most of the non-troll threads. But one-on-one advice would be a little too close to the ethical line for an attorney. Sorry.

[Nickolas !lbJFGb4l2Q No.792440]

>>792389
Well where should I be putting my money, if its vanguard what's the minimum amount I can enter to open an account

[Anonymous No.792443]

>>792133
Of course there is. You and moron McDuck here are missing the point entirely. The margin call is not an issue nor is the "emergency fund". It's for such a tiny amount it wouldn't be a problem. We're talking 2k - 5k at risk.
What you, >>790535 and >>790680 are saying is irrelevant. Sure it would be for someone who only had 5k in their emergency fund.

The only really relevant information I've gotten from this thread seems to be the issue with rising interest rates and my misconceptions on the actual yield of index funds.
>>790991 and >>792060

[Anonymous No.792447]

>>792389
Oh man, just stop, reading your comments is like watching a sad clown whose run out of jokes.

[Anonymous No.792468]

>>792440
>Well where should I be putting my money, if its vanguard what's the minimum amount I can enter to open an account
Google "four fund portfolio" and look for the bogleheads description. That'll give you guidance on choosing an asset allocation plan among Vanguard's core index funds.

As for Vanguard minimums, its $3000 to open an account in the US. If you want/need to start with less, you can open a target retirement fund with $1000.

(If you're not in the U.S., you'll need to check with your local financial institutions. By the way, there is a bogleheads page for UK investors and for EU investors.)

Depending on how much you have to invest and other considerations, you'll need to decide between ETFs (a brokerage account) or traditional funds (a standard account). See https://investor.vanguard.com/etf/etf-vs-mutual-fund for a comparison.

[Nickolas !lbJFGb4l2Q No.792485]

>>792468
What about Canada

[iHaz !MILLiOnz/Q No.792492]

>>792485
>What about Canada
There's a "Canadian version" of bogleheads. Check out:

http://www.finiki.org/wiki/Simple_index_portfolios

and related pages.