Refinancing my consumer loan

[jks21]

@cubanpete_the_swiss

The situation has to be compared with the worst, not the best.

I think it should primarily be compared with the average/median outcome + take into consideration the best and mostly the worst scenario.

@cubanpete_the_swiss

But he gains time, time in the market, time of experience and statistically even money.

I would argue there are better ways to gain experience. Not sure if the statistics are in favor either.

@cubanpete_the_swiss

He has no way of getting a cheaper credit and decided to invest anyhow.

If the decision is already made then good luck…
If OP seeks for advice from more experienced investors I think we owed to warn and not encourage him.

Anyway, I see myself out…

[Mihoudlx]

@Burningstone

That would be deflation. An annual inflation of 2.1% means that the CHF 1’000 from a year ago can buy you stuff worth CHF 979 today, your money loses (not gains) value with inflation.

Yes that’s what I meant … I meant 1032 today can buy 1000 from two years ago. That includes the stocks I bought with my consumer credit.

@Burningstone

Maybe, maybe not. What’s your basis for these assumptions? What makes you sure that a crisis like the dotcom bubble is not around the corner?

I don’t have any clue … thing is specifically on the dot.com buble if you bought at the worst time you would have break even 5.5 years later so i would just have lost the interest. And nothing prevents me buying low to average my positions. Plus mid 2023 was not the worst time to buy.

As well the average duration of a crisis is 1.5 years and the average correction in % is approximately 15%, specific cases like .com bubble are unlikely, they can happen, but they are unlikely.

@nabalzbhf

In the past 25y there were already two major corrections why can’t we have a decade like 2000 or 2007? What is different since then?

Nothing, we can definitely have them, specially when you consider the weight of the magnificent 7 in the nasdaq and sp500.
They’re just unlikely to happen.

@Mirager

Actually, screw all that, what’s your goal?

@Mirager

Actually, screw all that, what’s your goal?

Like all frugalists, financial freedom. I’m not risk adverse considered how comfortable the life with social contributions are (my best friend is more often in vacation that I am with his invalidity pension)
Short term goal was to buy a flat, just made it, now my next goal will probably be grow my own business.

@Helix

testfol.io is a good tool to play around with allocations. Returns are in USD. Doesn’t matter too much if you only want to compare the relative return of portfolios.

Nice one ! Also you are pretty convincing about options, i’ll definitely have a deeper look into that.

[Mihoudlx]

@jks21

The question is not, where to invest money from a consumer loan but if it makes sense at all to take a consumer loan to invest. And the answer - as written multiple times, from many mustachians here - is NO.

And

@jks21

Not sure if the statistics are in favor either.

Well for now and for me it’s more than worth it… maybe i’m the statistical exception maybe I’m a representation of the average. As well If you have better profiles than mine you can have lower interest 4.9% as low as 3.9% for home owners. Still not better than the risk free rate, neither as good a the lombard credit and as well not as good as option trading.

@jks21

You are taking an uncompensated risk.

Maybe … but not for now…

@cubanpete_the_swiss

Now our OP did not do that. But he gains time, time in the market, time of experience and statistically even money. He has no way of getting a cheaper credit and decided to invest anyhow.

Love you <3 , your understanding of the situation is perfect.

@jks21

If OP seeks for advice from more experienced investors I think we owed to warn and not encourage him.

Thanks for the warning ! I have some amount of experience but we can always learn. Most of the suggestions where pretty interesting.

[kart0ffel]

I don’t know the details but I heard deGiro offers margin loans with better conditions than IBKR (at least previous years). If someone is interested i would suggest to compare brokers for this specific case.

Ps. I don’t do margin.

[Wachwitz]

Smart men go broke three ways: liquor, ladies and leverage. – Charlie Munger

[Burningstone]

@Mihoudlx

thing is specifically on the dot.com buble if you bought at the worst time you would have break even 5.5 years later so i would just have lost the interest.

Assuming you have what it takes to stay in the market after a crash, most people say they can handle it, but only a small number of people actually handle it and don’t sell.

[Helix]

@Mihoudlx

Also you are pretty convincing about options, i’ll definitely have a deeper look into that.

Yes, they are ok (but not the best tool in the shed, only strictly better than a consumer loan). But I would be wary of all the other things you can do with options. Often information is littered with get rich quick schemes. There is no such thing as get rich quick. Everything has risks, and almost all of us have no edge (that includes you, especially you, and me).

Lifecycle investing calls for higher leverage up front and lower leverage later. This is informed by the fact that one has few liquid assets early, but a huge human capital that will pay wages for a long time. If you fail once or twice, it doesn’t matter that much, because you can work a year or two and invest the same again.

For example, you are not really leveraged 1001x on your 1 CHF net assets after taking a loan of 1000 CHF. Your illiquid human capital dwarfs this many times. You can access that human capital early with consumer loans. But they won’t give you years. A short ChatGPT-fueled resarch points to 6 months of salary at the higher end. Depending on the saving rate (e.g. 20%) that could be equivalent to some years of savings (e.g. 2.5 years).

The problem with the consumer loan is the nearly nonexistent (or even negative) expected return of investing it in stocks. Those highly leveraged bets from lifecycle investment are only worth it because:

• you can repeat them often (enough) and independent of each other (so arithmetic instead of geometric returns matter)
• those arithmetic returns have a sizable positive expected return

[GJ_01]

Right now, IB rates are 1.5% pa on CHF. Why not take that, instead of being tied down with a high interest consumer loan ?

[Mirager]

Timely: https://www.reddit.com/r/investing/s/Kyzw0qg5Xn

In April I learnt all there is to know about dividend investors, they were gleefully rejoicing while other investment subs were panicking, and r/options, r/TQQQ (r/LETFS is higher quality) were on suicide watch.