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  1. #16
    Senior Member Entrep's Avatar
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    Appreciate your input Snoopy, it's certainly a loan and will have (minimal) repayment and cashflow impact.

    Leverage to me means a chance to get liquidated. Liquidation is possible with everything in life. The $10K I put into the market today could be $0 tomorrow and the next week I might need money urgently.

    I have considered my financial position with my accountant too and the real chance of liquidation is nil unless the world ends. If that happens this small loan will be the least of my worries.

  2. #17
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    Quote Originally Posted by Entrep View Post
    Appreciate your input Snoopy, it's certainly a loan and will have (minimal) repayment and cashflow impact.

    Leverage to me means a chance to get liquidated.
    I have a rather different understanding of the word 'leverage'. To me, there is no hint of recklessness in that word. 'Leverage' just means any investment where some part of that investment, however small, is paid for by borrowing.

    Quote Originally Posted by Entrep View Post
    Liquidation is possible with everything in life. The $10K I put into the market today could be $0 tomorrow and the next week I might need money urgently.

    I have considered my financial position with my accountant too and the real chance of liquidation is nil unless the world ends. If that happens this small loan will be the least of my worries.
    Fair enough Entrap. You have not further disclosed your overall financial position, when even despite you being an anonymous person on the internet, I would not advise nor expect you to do so. Yet it does sound as if you could stand your new borrowed $10k investment being totally wiped out, and yet still be OK. So it sounds like you have evaluated your risk of doing this in a careful and considered way. All the best with it.

    SNOOPY
    Last edited by Snoopy; 27-03-2020 at 01:59 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  3. #18
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    Quote Originally Posted by Entrep View Post
    If you have plenty of equity and are comfortable paying the debt, even without dividends, would you ever consider adding to your mortgage in times like these, to truly take advantage? The dividends would more or less cover the interest if you choose wisely and the interest would also be deductible against the dividends, I imagine.

    Anyone considering this or done it before and have some tips?
    Coming back to the original question
    In my view there is substantially less risk in doing this now than 3 months ago
    The market is being restricted by liquidity now and this gives you the advantage of liquidity when the market is a lot cheaper and there is more transparency as to outlooks.
    A far less risky preposition than property in my view
    Landlords are being squeezed dry with their equity positions being under review and no income from their tenants.
    Property investments will be a train wreck unless something changes for the better
    " A report by JPMorgan estimates balanced or 60:40 mutual funds, a $1.5 trillion universe in the US and $4.5 trillion universe globally, need to buy around $300 billion of equities to fully rebalance to 60% equity allocation. At the same time, the $7.5 trillion universe of US defined benefit plans, would need to buy $400 billion to fully rebalance and revert to pre-virus equity allocations. Finally, there are the “balanced” sovereign pension funds such as Norges Bank and GPIF, which according to JPM would need to buy around $150 billion of equities to fully revert to their target equity allocations of 70% and 50%, respectively."
    https://www.goodreturns.co.nz/articl...or+27+Mar+2020
    https://www.interest.co.nz/rural-new...-banks-watches
    https://www.interest.co.nz/opinion/1...ebtcredit-taps
    https://www.goodreturns.co.nz/articl...or+27+Mar+2020
    Last edited by kiora; 27-03-2020 at 09:49 PM.

  4. #19
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    Buffett never recommends leverage into stocks. Only purchase stocks with surplus funds. How do you know where the bottom is? It can get a lot worse. I do not think this will be over in 3 months but only when a vaccine is produced.

  5. #20
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    Quote Originally Posted by voltage View Post
    Buffett never recommends leverage into stocks. Only purchase stocks with surplus funds. How do you know where the bottom is? It can get a lot worse. I do not think this will be over in 3 months but only when a vaccine is produced.
    Or other peoples money.His first purchase was an insurance company.
    "investing the money taken in as premiums that have not yet been paid out for claims, a sum of money known as the float. For example, if an insurer is holding $1 billion in anticipation of future claims, the company is free to invest the money in the meantime and keep the profits."
    Just leverage in another form
    https://www.fool.com/investing/2019/...-a-52-yea.aspx

  6. #21
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    Quote Originally Posted by voltage View Post
    Buffett never recommends leverage into stocks. Only purchase stocks with surplus funds. How do you know where the bottom is? It can get a lot worse. I do not think this will be over in 3 months but only when a vaccine is produced.
    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.

  7. #22
    FEAR n GREED JBmurc's Avatar
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    Quote Originally Posted by voltage View Post
    Buffett never recommends leverage into stocks. Only purchase stocks with surplus funds. How do you know where the bottom is? It can get a lot worse. I do not think this will be over in 3 months but only when a vaccine is produced.
    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.
    People don't have ideas, ideas have people

  8. #23
    Legend peat's Avatar
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    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
    For clarity, nothing I say is advice....

  9. #24
    Senior Member Entrep's Avatar
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    Ethics aside, you think the private equity industry shouldn't exist then, management buyouts?

  10. #25
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    Quote Originally Posted by Entrep View Post
    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.
    For clarity, nothing I say is advice....

  11. #26
    Senior Member Entrep's Avatar
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    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

  12. #27
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    Quote Originally Posted by Entrep View Post
    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.
    For clarity, nothing I say is advice....

  13. #28
    Senior Member Entrep's Avatar
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    Quote Originally Posted by peat View Post
    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.

  14. #29
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    Quote Originally Posted by Entrep View Post
    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.
    well imho everything needs to be said otherwise folks assume.
    margin call / bank recall - its all the same effect if you have no cash or cashflow.
    Did you know that your mortgage can be called at any moment!!??
    For clarity, nothing I say is advice....

  15. #30
    ShareTrader Legend Beagle's Avatar
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    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
    No butts, hold no mutts, (unless they're the furry variety).

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