Which means do not buy stocks until your mortgage is repaid, otherwise you are gearing by choosing to use borrowed money over your pocket money. That advice, if followed, would crucify the share market.
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And if you have access to zero rates like the major Banks in the USA .. or some countries around the world like Denmark’s Jyske Bank JYSKY, -3.81%, is now offering a 10-year fixed-rate mortgage at negative 0.5%.
Additionally, Finland-based Nordea Bank will offer a 20-year fixed-rate mortgage in Denmark that charges no interest, and the bank is preparing for the possibility of home loans up to 30 years in duration having negative rates. Currently, the rates on 30-year fixed mortgages average just 0.5% in Denmark.
When a mortgage rate is negative, a borrower still must make monthly payments toward their principal, but they ultimately pay back less than they originally borrowed. They would, of course, still have to pay other costs and fees.
As a conservative investor I re-iterate that one shouldnt buy shares with borrowed money. The companies mostly already have debt and highly likely other people are leveraged into their positions which all makes a mountain of debt when risk off becomes in vogue and what we have just witnessed occurs.
It is hard to take this stance when you have access to funds and the market is going up = but if one cant purchase ones shares outright then one shouldnt be playing the game.
One should have a lot of other non equity investments alongside any share portfolio. That percentage of equityinvestments to debt investments can change though , so that is how you up the ante if you choose to, you drawdown your cash and TD's and sell your bonds to buy more equities.
I'm doing that a little at the moment.
JBMurc , I knew some countries were negative but I didn't realise banks were paying people who borrow !! Does my head in.
Although if we get
Ethics aside, you think the private equity industry shouldn't exist then, management buyouts?
no not at all.
its just a question of risk for me. its too risky as an individual investor to leverage. I'm picking its the leveraged who caused the extreme downside recently and I imagine some of them are hurting hard because whoever lent them the money will sell at any price once the margin call is unpaid.
Agree that leverage like with CFDs or Commsec etc is risky but I am talking about a loan secured over my home. There is no margin call that can be made
yes there is, when the value of your house falls below the equity you have in it including the shares. Then you lose your job and cant pay the mortgage.
You cant absolutely rely on dividends or your job , you might get sick or be unable to work and health insurance doesn't cover it for example.
Only you can judge the risk on these possibilities but bad stuff can happen to anyone.
Of course that, I didn't think that needed to be said. That's not a margin call in the traditional sense of the word. If I spend $100K on a car (instead of mortgage, or buying shares outright) and then lose my job and crash the car, and can't pay my mortgage, and they foreclose, I don't think it's called a margin call.
This thread is about utilising home loans for shares. Not opening up a leveraged trading account.
You should never risk the safety and security of your family home for shares. That's gross recklessness in the current circumstances in my opinion.
This is going to be really bad https://www.nzherald.co.nz/nz/news/a...ectid=12321458