Re: Taking out a prosper loan to buy stocks
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To you Rico - OP mentioned using this as a savings scheme. So his non-invested money that he is using to pay off this loan is the money that he would be investing on a monthly basis (had he not taken the loan). So essentially he is trading a 25k lump sum to invest now in lieu of saving/investing 830.36 a month for the next 3 years and hoping that after 36 months his stock account is over $29,892.89 (cost of borrowing at 12% on Prosper). Any tax consequences of his investments are not of importance because OP states he would be using the money saved (monthly payment if he didn't take the loan) to invest anyway. The only way taxes might come into play is if OP is making tons of trades. But if he buys the stocks and lets it sit, he is actually saving a lot in commissions versus buying $800 in stocks each month.
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My issue is your original claim:
"What was it like a 6% compounded return he would have to achieve to make money on this?"
If he borrows at 12% or 13% and invests at a return of 6%, he will lose money. He will have to cover his losses by working and contributing excess money. No one with any understanding of economics would say that this is making money.
Suppose that OP is a firm with access to debt markets at 13% and a potential project that will earn 6%. Would you advise the firm to undertake the project by borrowing?
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