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Taking out a prosper loan to buy stocks
Link to my loan request.
I don't want to get in a huge debate here if I can get better returns on my stocks vs. the interest charged on the loan (i have dealt with enough of those questions at prosper). I have done my own analysis and decided that I am more than willing to take that risk. I understand I could potentially lose a good chunk of change here. But I won't lose everything, as I will buy atleast 5 differnt stocks with a market cap over 1 billion. They aren't going to all go bankrupt, and if that 1 in a billion chance hits, then so be it. Here is the basis of the calculations I did to take on this loan request: Assuming a $25k, 3 year loan at 12%, my total amount paid would be: $29,893.32. Assuming the following average annual returns, I would end up with this much money: 6%: 29,917.01 10%: 33,704.14 15%: 39,098.60 20%: 45,328.80 25%: 52,518.68 30%: 60,813.38 35%: 70,376.25 I don't want to get too cocky, so I am capping myself at a maximum annual return of 35%, which I actually think is achievable based on my opinion of my stock-picking ability. That is up for debate, not doubt, but I am not going to get in a pissing war here about stock picking ability. My main question is this, if you only achieve average stock market returns (8 - 10%) (and I am only 28 so have time in my favor), is this loan worth taking? I understand the stock market could crash in the next 3 years or the dollar could crash or whatever else, but what are your thoughts assuming a normal market? Thanks in advance! |
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