You can afford to lose it all, bankruptcy…so go for it.
newsuper Wrote: ------------------------------------------------------- > ^ good point kkent > > To the original poster, I’d say do it - borrow as > much as they will lend you and choose one of these > strategies the guys have outlined. > > I assume you are still pretty young, so you have > (relatively) nothing to lose. How many people lost > everything on their way to a fortune? Plenty. > > I’d suggest you have a once in a lifetime > opportunity to all but set yourself up for life > (depending on how much you can borrow of course). > > Pick a strategy that covers the loan costs so > there is no cost to you but still gives you either > a guaranteed return or capital growth (a bit more > risky) > > Seriously, what have you got to lose? Like you > say, if your strategy doesn’t pay, well we’re all > likely to have much much bigger problems… I really think that this kind of thing is what separates good financial advice from bad financial advice. Someone says here you can borrow money at 3% (tax deductible) and invest at 5% (tax-free) so you should borrow as much as you can. That’s very superficial and just not sound advice. This loan is not for free and the company that is providing the loan is not stupid. Presumably they could be investing in all kinds of projects that return better than 3% (or you really don’t want the loan because you don’t want to be working there). They give you these loans to tie you to the company. If you can borrow $100,000 and net $3000/year with some risk, is it really worth it? My experience with these things is that they will only lend you money to the extent that low-risk benefit is not very consequential compared to your salary. That means if you’re making $100K/year they might lend you $100K so your salary can go up by 3%. Big deal. The longer you stay there, the more money you borrow, the more risk you take, the harder it is to unwind the whole trade. The question comes down to how well you can manage your personal risk which is almost certainly not as well as you might think you can. The more complications you have in your life and your job, the less likely it is that you should do this. Sit down and try to think of all the ways that you can be separated from the assets but keep the loan. Then write down all the ways that you have to pay back the loan if that happens. Here’s a start: a) The risk in an investment you make with the money is not what you thought it was. Reasonable people above have trouble deciding on the risk of muni bonds. b) You get divorced. A liability your spouse can’t assume but assets that either of you can own is a bad spot to be in in divorce courts. Divorce judges are not necessarily financially savvy and don’t care about things like liquidity and asset-liability matching. c) You get a judgment against you for running over the neighbor’s dog and need to pay quickly. d) You talk yourself into moving the investment to something illiquid, like a down payment on a bigger house. e) In a moment of weakness, you decide that those new ZR-1 Vettes are gotta have. f) Your company goes bankrupt leaving you without a job but the loan is called (read the fine print). etc, etc… It might be a good deal, but you make decisions like this based on your life not by opening the newspaper and subtracting 3 from 5. If an eighth grader could do it, it’s probably not worth much.