Investment BS Thread - Stocks/Futures/Mutual Funds/Bonds/Commodities/Options/ETFs/401ks/Etc

No I said I don’t have $1m lol I wish.

This is a good argument though because we are clearly on opposite sides and both making good points (in my opinion).

I would say this: if you can borrow money at 3%, and have a portfolio that you can leave alone (i.e. not sell, just add to), that yields 5%, ALWAYS TAKE THE LOAN! Your money will make more than the difference (5% - 3%).

Where am I wrong here? Won’t you always end up better in this scenario? It allows you to take advantage compounding your money over the course of the loan, which you can’t do if you buy everything with cash.

 

My holdings are Nearly All vanguard index funds close to 80% stocks 20% bonds, mm. A few single company stocks. About $600k in equities.

 

Nice job, you can turn that into a good income already if you wanted to.

 

Thats is an obvious yes, you are correct; except that you cannot guarantee your account will return 5%, whereas you can guarantee your loan will always cost you 3%. This is how a lot of folks got screwed in 07-09. They had debt, they had stock market gains, they had a job.... the they lost their job, the market crashed, and they still owed all their debt. I am financially conservative when it comes to debt, clearly. Again, like you said, we are both making great points, but have different approaches to managing finances. Nothing wrong with that. Technically speaking, you will average over 5% gains being in the market over a long period of time, but like I said we cannot guarantee what the market will be doing when we need to access those funds. I think you have made money, we all expect a correction, you have debt - so I would remove enough funds to pay your debt and then start saving cash and wait for an ideal buy-in over the next year or two. Nothing with either strategy though, assuming you are financially stable enough to handle being laid off for some time without having raid your investments.

So this brings up an entirely new discussion that I would like to open to the forum: how much is enough for your emergency fund and where do you keep it to maintain it's buying power? Secondarily, what life events justify tapping into this fund?

 

Good point. I do almost consider the 5% dividend guaranteed. I am invested in very conservative companies, mostly dividend aristocrats that raised their dividends through the last recession. I am actually missing out on a lot of gains to maintain the dividend payments that I get every month (i.e. I have no AMZN or any of the high fliers, I have T, VZ, KO, PEP, JNJ, etc.) I do think the dividends are as close as you can get to guaranteed. More guaranteed than a job honestly. It’s cash that comes in like clockwork, at the expense of potential higher gains.

 

A lot of times you can get 0% loans for 72 months. Always take the loan. Heck even then most new purchases are 1.9% in which case there’s savings accounts yielding higher. Take the loan.

Loans aren’t bad, no matter how much Dave Ramsey preaches it. How many successful entrepreneurs and businesses got where they are without leveraging debt

 

This. Had one for 0.9%. Could have paid flat out but that money yielded more at the time where it was sitting.

 

Anybody like Gold?

 

This is my thought, just wanted to see what others think. I have pretty much taught myself what I know about finance so I ask as many questions as I can.

 

I like to keep about 25k in emergency funds in my vanguard prime money market mutual fund. Yields about 2.2%. I would tap it in cases of emergency such as job loss.

 

Any risk in that fund? Insured? That’s a decent return if it is always accessible.

 

Not FDIC insured but i have zero concerns, I sleep like a baby. The share value stays at a $1. Yes you can get a checkbook if you like. Symbol is vmmxx. Current yield is 2.36%

 

My wife and I keep a GolmanSachs savings account that yields us 2.25% apy. We keep it at 50k, and will take it down to 30k for big purchases that aren't necessarily emergencies like a new roof or if a dog eats a chew toy and it gets stuck in his intestine and needs surgery (that was last month). But we don't go below 30k unless its a job loss emergency. My goal is to have 75k in this account by the end of 2020, and then never dip below 50k of buying power from there forward. Our account is fdic insured.

 

How do these (the 2 discussed above) work when it comes time to pay that 2%? Is it monthly, 2% of your total divided by 12, gets deposited into your account? Or quarterly, yearly?

 

Vanguard prime mm fund pays a monthly dividend.

 

Thanks, that’s a better dividend than AAPL and WMT, which I own, but much less risk.

 

I get mine monthly. So its really 2.25%/12months every month on the balance. Its deposited directly into my account.

 

Can you explain this more?

 

I called Merrill Edge, can’t get into the Vanguard fund since I’m not a customer. Can’t get into the Merrill Lynch fund unless I deposit $100k cash into it to initiate it, no exceptions for that. Anybody know of a Money Market type fund (could be a mutual fund) that I can buy and sell shares of, that yields around 2%? I’d like low risk, the whole point of doing it, and it doesn’t have to be insured.

 

Anyone can open an account at vanguard.