How to take advantage of the low interest rates and invest into the market?

[Kevin Durant]

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Apologies in advance for the likely ignorant question, but are there any sources of non-mortgage lending that I could obtain at <5% interest to invest in the stock market?

 

[dabears505]

Kevin Durant, stop worrying about money, and take care of your health. Corona

 

[Mikkel]

On a related note:

Everyone who told me I was wrong to prepay my mortgage instead of investing:

You were wrong.

 

[deleted171991]

Apologies in advance for the likely ignorant question, but are there any sources of non-mortgage lending that I could obtain at <5% interest to invest in the stock market?

That would be really dumb.

One can't know when we hit rock bottom, and also for how long. We may become the next Japan. The entire world economy may take forever to recover. (Once a big machine is stopped, it's much more difficult to restart it, especially if it just sat doing nothing.)

Heck, there may be an entire domino effect, with wars, revolutions, who knows.

 

[dannyboy1]

That would be really dumb.

One can't know when we hit rock bottom, and also for how long. We may become the next Japan. The entire world economy may take forever to recover. (Once a big machine is stopped, it's much more difficult to restart it, especially if it just sat doing nothing.)

Heck, there may be an entire domino effect, with wars, revolutions, who knows.

How long do you think this can last? For one I don’t think this “social distancing” will even work unless you go full china style ( even then you it might be too late already ). there are a lot of people in this country living paycheck to paycheck. Keep them out of work too long you have riots in the streets. Keep printing money to give out you become Venezuela. Hopefully one of the antivirals will be found to work and soon, because if not we will have a choice to make. Sacrifice a lot of (mostly) old people or become a third world country....

 

[deleted171991]

The Republican party would love nothing more than a pretext for installing an autocratic regime. The longer this lasts, the longer they can brainwash the population, especially once they start censoring the press. Already Trump is trying to rewrite history.

I am much more afraid that we'll lose our democracy than of the economic losses. There is an increasing chance for the former. What we are seeing already is the severe erosion of democratic institutions, where nobody does the right thing because everybody is afraid to tell the emperor that he's naked.

 

[nimbus]

That would be really dumb.

One can't know when we hit rock bottom, and also for how long. We may become the next Japan. The entire world economy may take forever to recover. (Once a big machine is stopped, it's much more difficult to restart it, especially if it just sat doing nothing.)

Heck, there may be an entire domino effect, with wars, revolutions, who knows.

I’m considering the opposite of OP. I have 6mos cash on hand but I am considering selling equities so I have 18mos cash. Who knows how long this will last.

 

[pgg]

On a related note:

Everyone who told me I was wrong to prepay my mortgage instead of investing:

You were wrong.

🙂

In 2019 we paid off the house we live in and have been enjoying the pro-sleep effect of the first zero-debt period of time in our lives since ... I guess we were teenagers. And of course right now I feel a little better that I didn't plow $200K into the stock market in the fall.

But the truth is, we and you won't know how far ahead or behind that move put us for another 20 years.

 

[Mman]

On a related note:

Everyone who told me I was wrong to prepay my mortgage instead of investing:

You were wrong.

congratulations on your market timing

 

[San Marzano]

I’m considering the opposite of OP. I have 6mos cash on hand but I am considering selling equities so I have 18mos cash. Who knows how long this will last.

This is exactly my sentiment. And it scares the **** out of me. This event is changing life as we know it in America, probably for the duration of our lifetime. We still have no idea what that even means either.

 

[Mikkel]

congratulations on your market timing

This had nothing to do with market timing.

This was risk evaluation, plain and simple.

5% definite return by pre-paying mortgage, versus possible 7% annualized return over 30 years.

It was an easy choice for me. Now I have a ton of free cash to spend on heavily discounted stocks.

 

[Mman]

This had nothing to do with market timing.

This was risk evaluation, plain and simple.

5% definite return by pre-paying mortgage, versus possible 7% annualized return over 30 years.

It was an easy choice for me. Now I have a ton of free cash to spend on heavily discounted stocks.

actually you would have been better off not paying the mortgage, hoarding the cash, and buying the stocks now. Paying off the mortgage early meant you have way less free cash to spend.

Anyways going to have to wait 25-30 years to assess the ultimate outcome of such a choice.

 

[Mikkel]

actually you would have been better off not paying the mortgage, hoarding the cash, and buying the stocks now. Paying off the mortgage early meant you have way less free cash to spend.

Anyways going to have to wait 25-30 years to assess the ultimate outcome of such a choice.

That would be the riskiest way because the only payoff you get is if the market tanks.

At least with mortgage prepayment, you get a guaranteed return. If the market tanks, you can put your extra income in the market, while still realizing the savings of less mortgage interest paid over time.

 

[pgg]

actually you would have been better off not paying the mortgage, hoarding the cash, and buying the stocks now.

THAT would be market timing.

Anyways going to have to wait 25-30 years to assess the ultimate outcome of such a choice.

Yes.

I don't disagree with any of the math you've posted in the past, about how a lump sum invested in stocks at any given time is very likely to be worth more 3 decades later than a fixed rate mortgage paid off at the same time. But the reason for that is that you're being rewarded for accepting risk. Well, risk just showed up.

It's also very likely that the market will rebound promptly within a few years ... but there's still risk out there. Maybe we'll be Japan and we'll see 0% real gains for a decade or more.

 

[UscGhost]

This had nothing to do with market timing.

This was risk evaluation, plain and simple.

5% definite return by pre-paying mortgage, versus possible 7% annualized return over 30 years.

It was an easy choice for me. Now I have a ton of free cash to spend on heavily discounted stocks.

Except that mortgages are 3.5 % not 5%....and you can deduct it..so you really are only paying maybe 2.5%. So you got 2.5% return on your money. And average inflation is about 2-2.5%...so you really got no return.

I'll keep my money in the stock market or real estate and earn my 7-15%

 

[Mikkel]

Except that mortgages are 3.5 % not 5%....and you can deduct it..so you really are only paying maybe 2.5%. So you got 2.5% return on your money. And average inflation is about 2-2.5%...so you really got no return.

I'll keep my money in the stock market or real estate and earn my 7-15%

My mortgage was 5%.

With deduction, net gain is 3.5%, with zero risk.

With inflation at 2%, net gain is 1.5% with zero risk.

I took the 1.5% net gain instead of risking it all in the market to get a -30% return.

 

[Mman]

My mortgage was 5%.

With deduction, net gain is 3.5%, with zero risk.

With inflation at 2%, net gain is 1.5% with zero risk.

I took the 1.5% net gain instead of risking it all in the market to get a -30% return.

the odds the market will return -30% over a 30 year stretch are essentially nothing. Because you locked in that 1.5% gain over 30 years, not just over the present time. I'm not against people paying off mortgage debt. It's not a bad thing. I just think people need to have their eyes open about what they are doing when that happens.

Now if you really wanted to get crazy, maybe you could take out a HELOC and stuff a bunch of money in the market right now although I think they changed the rules about that being deductible interest.

 

[Arch Guillotti]

My mortgage was 5%.

With deduction, net gain is 3.5%, with zero risk.

With inflation at 2%, net gain is 1.5% with zero risk.

I took the 1.5% net gain instead of risking it all in the market to get a -30% return.

ok we get it.

you are smart and/or lucky.

do you want a cookie or something?🙂

 

[Mikkel]

the odds the market will return -30% over a 30 year stretch are essentially nothing. Because you locked in that 1.5% gain over 30 years, not just over the present time. I'm not against people paying off mortgage debt. It's not a bad thing. I just think people need to have their eyes open about what they are doing when that happens.

Dollar for dollar, the money spent in 2018-2020 to invest up to this point earned at best -20%.

Dollar for dollar, the money spent in 2018-2020 to prepay up to this point earned at best 1.5%.

Further prepaying right now is a terrible idea when stocks are so heavily discounted. Invest RIGHT NOW, and you can build in a 30% gain if stocks return to their all time high.

However, taking out a loan to get invested right now COULD be a good idea, but it's a risk you have to balance with the known loss of the loan interest.

I guess it comes down to conservative versus aggressive investment strategies.

 

[Mikkel]

ok we get it.

you are smart and/or lucky.

do you want a cookie or something?🙂

I was just trying to be the voice of reason in the day of irrational exuberance.

All the talk about putting 100% in stocks was eerily similar to the housing talk in the 2000s. "Houses are appreciating 15% per year! It's foolish NOT to buy right now!!"

The good news for everyone though is that the losses only get realized when you sell, true with both housing post-2008 and *hopefully* post Covid 19.

 

[Mman]

Dollar for dollar, the money spent in 2018-2020 to invest up to this point earned at best -20%.

Dollar for dollar, the money spent in 2018-2020 to prepay up to this point earned at best 1.5%.

That is all true, except that the money paid doesn't stop "up to this point", it goes on for however long your life is. The money spent to prepay is locked into that return, the money spent to invest has decades to return more.

But paying off a mortgage is a nice feeling and helps future cash flow needs.

 

[Mikkel]

That is all true, except that the money paid doesn't stop "up to this point", it goes on for however long your life is. The money spent to prepay is locked into that return, the money spent to invest has decades to return more.

But paying off a mortgage is a nice feeling and helps future cash flow needs.

The shares bought at DOW 30k don't appreciate any more than the shares you buy at DOW 20k. You actually appreciate much more over a lifetime when you buy more shares at a relatively lower price.

The only reason why prepaying a mortgage is better than holding cash in the hope of a market correction is because there's a definite return on the prepayment versus a known 2% inflationary annual LOSS sitting on cash. The downside is you don't have as much cash on hand to take advantage of the deep discounts.

 

[vector2]

The shares bought at DOW 30k don't appreciate any more than the shares you buy at DOW 20k. You actually appreciate much more over a lifetime when you buy more shares at a relatively lower price.

This is why buy and hold with dividend reinvestment is so effective. You capture all the upside but if the market goes down you are still decreasing your average cost with each DRI. Most people who wait at 30k so they can buy at 20k not only miss the dividend compounding but they also pretty much never nail the “go-all-in” bottom

 

[Mman]

The shares bought at DOW 30k don't appreciate any more than the shares you buy at DOW 20k. You actually appreciate much more over a lifetime when you buy more shares at a relatively lower price.

The only reason why prepaying a mortgage is better than holding cash in the hope of a market correction is because there's a definite return on the prepayment versus a known 2% inflationary annual LOSS sitting on cash. The downside is you don't have as much cash on hand to take advantage of the deep discounts.

Nobody is debating that shares bought at a lower price will appreciate more. The point is, there is no money to invest in shares at 20K because it all got puts towards a mortgage payment. The only amount you can invest extra at this point is the now nonexistent mortgage payment. The relevant comparison will be when the Dow is at 100,000 in 30 years, would it have been better to pay the mortgage with that known fixed low return or would it have been better to have invested in the Dow at 30,000 and rid out the ups and downs?

 

[anbuitachi]

well it looks like stock market is skyrocketing these past few days. maybe we past the bottom already

 

[Mman]

well it looks like stock market is skyrocketing these past few days. maybe we past the bottom already

hard to say. I suspect it won't really take off until it appears we have a handle on the virus. I did start making some purchases this week, though, at what I considered distressed prices of some individual stocks (HEI and MGM) as well as sold some puts that aren't going to be exercised (figuring I might as well make some income this week if clinical volume will be way down while happy to get the stocks at the discount if they did fire).

 

[dchz]

well it looks like stock market is skyrocketing these past few days. maybe we past the bottom already

No where near. More likely a reflection of people like me buying in.

On a related note:

Everyone who told me I was wrong to prepay my mortgage instead of investing:

You were wrong.

This is a prime example of being result oriented. @pgg chime in please.

 

[vector2]

well it looks like stock market is skyrocketing these past few days. maybe we past the bottom already

Dead cat bounce. Will take some time for manufacturing and employment numbers to bottom and I don’t think the market is currently pricing in how bad some of the future data will be. I’m with blade that S&P will get closer to 1800-2000 before the carnage is done. I’m still buying a bit on the way down but I’m not buying heavy yet.

 

[Mman]

This is a prime example of being result oriented. @pgg chime in please.

It's like declaring a marathon winner 1 mile into the race.

 

[Tramadeezy]

Are you guys buying into index funds or individual stocks or both? How much are you looking to throw at the market? 50-100K? I don't own any individual stocks and I'm debating if now or some time in the near future is a good idea to grab some big chunks of Amazon, facebook, google while they are at a discount. At the same time I'm a little nervous that we may be headed toward some real economic devastation and it would be more wise to save as much cash as possible...

 

[Mman]

Are you guys buying into index funds or individual stocks or both? How much are you looking to throw at the market? 50-100K? I don't own any individual stocks and I'm debating if now or some time in the near future is a good idea to grab some big chunks of Amazon, facebook, google while they are at a discount. At the same time I'm a little nervous that we may be headed toward some real economic devastation and it would be more wise to save as much cash as possible...

I would highly advise against buying individual stocks unless you are willing to do a lot of work. Something like Amazon is only 13% off it's all time high so it is barely at a discount as compared to some other stocks that are like 50-80% off highs. As to how much actual money you are going to invest that is a very personal decision and people here have differing abilities to invest (by an order of magnitude or more).

 

[Mikkel]

Nobody is debating that shares bought at a lower price will appreciate more. The point is, there is no money to invest in shares at 20K because it all got puts towards a mortgage payment. The only amount you can invest extra at this point is the now nonexistent mortgage payment. The relevant comparison will be when the Dow is at 100,000 in 30 years, would it have been better to pay the mortgage with that known fixed low return or would it have been better to have invested in the Dow at 30,000 and rid out the ups and downs?

Sure, you don't have a pile of cash around to invest because of prepaying the mortgage, but if you refinanced like I did, my rate is 40% less than before. I can put a lot more money into the market now because my monthly expenses are a lot less.

How long will it take to get to DOW 30k? 6 months? 1 year? 3 years? Impossible to know, but if you bought at DOW 30k before, that time you wait to get back to 30k to break even is time that could have been shortened if you prepaid. In other words, stocks held waiting for appreciation back to baseline is money and time wasted.

I have lots of retirement money invested at market highs, so it's not like I'm hoping things never recover.

 

[Mikkel]

And to add to the above, dividend reinvestment only applies if your companies earn a profit and distribute.

It's likely a lot of companies will not be offering dividends for a long while, thus adding to the waste of holding stocks that are neither appreciating nor distributing money to shareholders.

 

[Mman]

Sure, you don't have a pile of cash around to invest because of prepaying the mortgage, but if you refinanced like I did, my rate is 40% less than before. I can put a lot more money into the market now because my monthly expenses are a lot less.

How long will it take to get to DOW 30k? 6 months? 1 year? 3 years? Impossible to know, but if you bought at DOW 30k before, that time you wait to get back to 30k to break even is time that could have been shortened if you prepaid. In other words, stocks held waiting for appreciation back to baseline is money and time wasted.

I have lots of retirement money invested at market highs, so it's not like I'm hoping things never recover.

I understand your point, I'm just pointing out that mathematically 30 years from now it is still overwhelmingly likely that money invested in the stock market instead of prepaying a mortgage will have become a greater return. That's just the math of it, especially when you factor in the tax benefits.

I do understand that subjectively you feel better right now not having the mortgage instead of watching an investment depreciate, but the only long term benefit to that feeling is if it helps you stay the course and not make drastic decisions. And if it helps, great!

 

[dchz]

And to add to the above, dividend reinvestment only applies if your companies earn a profit and distribute.

It's likely a lot of companies will not be offering dividends for a long while, thus adding to the waste of holding stocks that are neither appreciating nor distributing money to shareholders.

@Mikkel Is your $800K+ group hiring with partnership in surgery center? I'm sure someone would go for the cash given this market.

 

[anbuitachi]

how are private groups paying their employees with most surgeries cancelled?

 

[pgg]

how are private groups paying their employees with most surgeries cancelled?

A few people have posted about this here lately. Accounts receivable keep coming for a while, then loans, +/- partners not taking a paycheck. The hazard of being a business owner, I guess.

 

[deleted162650]

A few people have posted about this here lately. Accounts receivable keep coming for a while, then loans, +/- partners not taking a paycheck. The hazard of being a business owner, I guess.

MD only and production based (even those still on the track) so no real employee salaries to deal with. We have however decided to open up the option to have monthly retirement contributions be placed into a separate account that can be drawn off of if this goes on for too long. If needed, the money will simply get taxed at the usual rate. Once things return to normal, you can then increase contributions to catch up by years end.

 

[<(^_^)>]

Apologies in advance for the likely ignorant question, but are there any sources of non-mortgage lending that I could obtain at <5% interest to invest in the stock market?

Interest Rates | Interactive Brokers LLC

How much interest is your broker paying you? IBKR clients can earn market rate interest on instantly available cash balances.

www.interactivebrokers.com

1.15% 100k-1M. Can be highly lucrative under the right circumstances, but a V-shaped recovery is far from guaranteed. If you have to ask...might want to strongly consider whether this is something that is right for you.

 

[Kevin Durant]

Interest Rates | Interactive Brokers LLC

How much interest is your broker paying you? IBKR clients can earn market rate interest on instantly available cash balances.

www.interactivebrokers.com

1.15% 100k-1M. Can be highly lucrative under the right circumstances, but a V-shaped recovery is far from guaranteed. If you have to ask...might want to strongly consider whether this is something that is right for you.

Wow, thanks for the direct answer. I was starting to lose hope in finding an option until this popped up.

You're right that I have to do more research, and I'm just a poor resident without much money to invest right now. But I truly believe that over the course of the next three years, any money invested in an index will beat 7% a year.

Edit: It seems like I would still get kept out because of the 100% Net Asset requirement for the first 30 days though.

Mutual Funds Margin Requirements | Interactive Brokers LLC

Get the margin requirements for trading mutual funds based on your residence and exchange location.

www.interactivebrokers.com

 

[anbuitachi]

Wow, thanks for the direct answer. I was starting to lose hope in finding an option until this popped up.

You're right that I have to do more research, and I'm just a poor resident without much money to invest right now. But I truly believe that over the course of the next three years, any money invested in an index will beat 7% a year.

Edit: It seems like I would still get kept out because of the 100% Net Asset requirement for the first 30 days though.

Mutual Funds Margin Requirements | Interactive Brokers LLC

Get the margin requirements for trading mutual funds based on your residence and exchange location.

www.interactivebrokers.com

so were you able to find anything? that link is broken? itd be amazing to borrow couple mil, and make a good amount

 

[pgg]

so were you able to find anything? that link is broken? itd be amazing to borrow couple mil, and make a good amount

It'd be less amazing to borrow a couple mil, lose a third of it day trading, and be stuck with a mil in debt.

Even less amazing would be to see you're down 1/3, get anxious, and take even greater risks in the hopes of getting back to the break even point. Then you're down 1/2.

This is a terrible idea.

 

[anbuitachi]

It'd be less amazing to borrow a couple mil, lose a third of it day trading, and be stuck with a mil in debt.

Even less amazing would be to see you're down 1/3, get anxious, and take even greater risks in the hopes of getting back to the break even point. Then you're down 1/2.

This is a terrible idea.

cant you just follows trumps foot steps and declare bankrupcy?

 

[GravelRider]

cant you just follows trumps foot steps and declare bankrupcy?

I don’t think Trump has ever declared personal bankruptcy. A number of his hotels and casinos have declared bankruptcy. He has also had multiple failed business ventures that simply failed and were liquidated without declaring bankruptcy.

 

[pgg]

cant you just follows trumps foot steps and declare bankrupcy?

Well, this isn't student loan debt, so I guess it's dischargeable. 🙂

So maybe the better plan is to borrow the money from those guys, and use it to pay off your student loans, and then declare bankruptcy!

 

[BLADEMDA]

well it looks like stock market is skyrocketing these past few days. maybe we past the bottom already

Just give it 2 more weeks before being so sure the bottom is in. Deaths are going to go way up and we will be at massive unemployment by the end of May. The market may look past all of this or maybe it won't. IMHO, the market is likely to go down again before going back up to 2800.

 

[anbuitachi]

Just give it 2 more weeks before being so sure the bottom is in. Deaths are going to go way up and we will be at massive unemployment by the end of May. The market may look past all of this or maybe it won't. IMHO, the market is likely to go down again before going back up to 2800.

we'll see. the bottom 90% of US only holds 25% of the wealth. yes it hurts th eeconomy, but with fed pumping in trillions of dollars, it may easily cover a lot of that up. its possible the price today already includes the likely massive number of unemployed. with unlimited bond buyout, and possibly trillions more in stimulus soon, its hard to see it go down even with high deaths. most of these rich guys/funds are not the ones dying.

 

[BLADEMDA]

Wow, thanks for the direct answer. I was starting to lose hope in finding an option until this popped up.

You're right that I have to do more research, and I'm just a poor resident without much money to invest right now. But I truly believe that over the course of the next three years, any money invested in an index will beat 7% a year.

Edit: It seems like I would still get kept out because of the 100% Net Asset requirement for the first 30 days though.

Mutual Funds Margin Requirements | Interactive Brokers LLC

Get the margin requirements for trading mutual funds based on your residence and exchange location.

www.interactivebrokers.com

The probability that an investment made at an S and p level of 2500 (like next week for example) is worth 20% more in 12 months is about 90%. In my lifetime, I have never seen such probability in any equity investment ever. Yes, I am putting my money where my mouth is and going from a 60%/40% allocation at the start of the crash to a 85%/15% allocation at 2200. Below 2100 I'd be 90/10. Even if we do not re-test 2200 again I'll be buying equities heavily once we get through April/early May. IMHO, the market will likely bounce quickly to 2800 once the pandemic gets under control.

 

[pgg]

The probability that an investment made at an S and p level of 2500 (like next week for example) is worth 20% more in 12 months is about 90%. In my lifetime, I have never seen such probability in any equity investment ever. Yes, I am putting my money where my mouth is and going from a 60%/40% allocation at the start of the crash to a 85%/15% allocation at 2200. Below 2100 I'd be 90/10. Even if we do not re-test 2200 again I'll be buying equities heavily once we get through April/early May. IMHO, the market will likely bounce quickly to 2800 once the pandemic gets under control.

You should've been a surgeon ... sometimes wrong, never in doubt. 😉

 

[anbuitachi]

The probability that an investment made at an S and p level of 2500 (like next week for example) is worth 20% more in 12 months is about 90%. In my lifetime, I have never seen such probability in any equity investment ever. Yes, I am putting my money where my mouth is and going from a 60%/40% allocation at the start of the crash to a 85%/15% allocation at 2200. Below 2100 I'd be 90/10. Even if we do not re-test 2200 again I'll be buying equities heavily once we get through April/early May. IMHO, the market will likely bounce quickly to 2800 once the pandemic gets under control.

so why not borrow