Is it worth borrowing to invest?

I know now' a great time to buy, but is it worth it to borrow, say from line of credit, to invest in stocks?
I do have savings, which I've used on stocks, and made good gains. But I'm wondering if it's wise to borrow, at 3-5%, to increase my gains?
Thoughts, from the wiser investors?

 

Great question. I'm subbed for the answers.

 

I would never borrow to invest.

 

The word you're looking for is leverage. In the end it comes down to your risk tolerance. If your investments go well, you make more. If they don't, you hurt more.

https://www.blueleaf.com/articles/how-leverage-works-in-investments/

 

No.

 

Investing with borrowed money is known as buying on "margin". Professionals/investors can multiply their earnings/gains by using margin. This is great in an up market. The down side is a "margin call". That is when the broker forces the borrower to sell in order to keep within contractual debt/asset limits. This was recently and dramatically demonstrated late February and early March when the market sold off. Investors were forced to sell. Even safe havens (e.g., gold, digital currency), were sold down hard.

Warning: old guy diatribe follows. Debt is generally bad. Usury is discussed in both the quran and bible. Yes, a modern "necessary" evil. However, currently many individuals, companies and countries find them selves up against the wall, due to debt. Individuals, companies and countries with large cash reserves (i.e., low debt) will survive the downturn. Those in debt/no cash reserves are getting bailed out (I warned you about the diatribe).

YMMV.

 

I never do it.

But governments do.

AND frankly I should have. But my gonads just are not watermelon sized.

 

For me the answer is no. Debt free feels good and less worrisome in both good and bad times.

In the past the answer would have been 'maybe' with a long list of assumptions, as I'm more a conservative or 'measured risk' type.

Oh, I've been buying recently. But all within a Roth brokerage account that I had swept a bunch of 2019 earnings into a cash fund in January. Not borrowed money.

And it will be tax free if there is any success!

 

I invested in an international organization that distributes a product that is in high demand globally and made a killing. Good luck.

 

Are you a United States Senator by chance?

 

Drug lord.

 

Killing on a % or cash basis?

Drugs or toilet paper?

 

No, just someone who took advantage of an opportunity that was presented by someone who knows someone about something. It's all the goodness that you can get.

 

that Roth 'may be' tax free, there is no guarantee on that, tax laws are subject to change, nothing is certain out there, especially decades down the road!

 

No reason for any tax reform. There is a new game in town. Congress just passed a 2 trillion dollar relief bill. The Fed has signed up for 6 trillion in assist purchases. QE to infinity and beyond.

 

What are the repayment terms for your line of credit? Borrow as much as you want up to the max limit and no time limit to repay principal? Keep in mind the market may take some time to recover (several month, a year, whatever). You would need to be comfortable paying interest on the loan in the meantime.

 

You paid for your King shocks with caerphilly cheese?

 

No, it's soap. Yeah, that's it. Soap.

 

If the Roth were to be extinguished, it would be from a specific date going forward and all existing Roths would be grandfathered under their current rules.

How do I know?

Too many in congress have mothers that own Roths, and not one would be willing to take a beating from mama to do a reverse taxation on the earnings of a Roth.

And remember, the principal has already been taxed. The earnings are what would become subject.

 

and at one time the Social Security income was to NOT ever be taxed
guess what? to some people it is partially taxed now, even to those of modest retirement income
there is no certain to what happens in the future and who is making the laws then
things always seemed to get double taxed...
taxing authorities cannot be trusted with any future promises