Taking out a prosper loan to buy stocks - Page 10

Evan · #91 06-12-2007, 11:57 PM

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You have to get 8-10% returns on the market (historical averages that most investors don't even get)

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I agree with most of what you are saying, but if 8-10% is the average isn't this what most investors should end up with? It's like saying your ev is $8 but most of the time you will end up with $5.

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It's because people don't invest in boring indexes. They'd rather buy individual stocks and lose money or make less than the market.

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This doesn't make any sense to me either. Shouldn't a random individual stock make the same amount as the ev of the market in the long run? Why is your ev less because you are buying an individual stock? If the stock is more risky shouldn't it have a higher average return?

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1) people buying random (or not random) stocks incur trading costs that aren't a part of market benchmarks
2) people have to pay taxes on sales
3) there's a long tail of terrible performing stocks...while it doesn't change the ev, you're thinking about the variance wrong

Shoe · #92 06-13-2007, 12:09 AM

I'm having a lot of trouble with 2+2 right now, but just wanted to say thanks for all of the replies. I sitll think I am going to go through with the loan but am thinking of cancelling it and re-listing for a smaller amount where I will get a lower interest rate. I was expecting the loan to be fully-funded by now and the interest rate dropping. I think I could get a 15-18k loan funded at prosper for closer to 10%.

I'm also considering if I can get the funds from elsewhere. I have a couple life insurance policies I could cash in and add to my account, and then take the rest out on margin (which is 10% at my broker for balances less than 25k). I'm leaning towards that as the margin interest is tax deductible where as the prosper interest is not. I don't need the life insurance as I don't have any dependents, and I have been unhappy with the gains in those policies for several years now.

A couple other points: For those who think investing in the stock market is just willfully throwing away your money, I think you are dead wrong.

My breaking even with a 6% return vs. the 12% loan thing. I understand opportunity cost and know I would be coming out behind with that factored in. However, I do not think I would stay committed to saving each and every month without getting my money in there as a lump sum. I would save for several months in a row but would probably get side-tracked for a few months at a time in the process. But your point is well-taken.

Prop bet. I will not accept any bets without being offered odds. Just because I am confident in my ability does not mean I think a 1:1 bet is smart. I also do not know of a trustworthy source (that both parties could agree on) to keep our money tied up in for over a year and still have enough confidence that I would get paid. we might as well just drop the idea of betting. Sorry if I led anyone on.

For the guy who compares making money in the stock market to denying the holocaust ever happened, I don't see how you can even draw a comparison, yet I am supposed to believe that I am the illogical one.

DC -- thank you for your post, I consider you to be one of the most respected posters in this forum and will definitely be re-thinking your post and analyzing it more closely tonight.

To those who think people on prosper are idiots for funding me -- whether or not you agree with my loan anyone who gets a piece of me a 13% is getting a great bargain, as I will not default no matter how my stocks do.

Others, thank you for your comments as well. I'm going to try to go back and answer any outstanding questions and review all the posts again. I got kind of lost with the flood of responses and the 2+2 connectivity issues tonight. Lots of great posts that I need to spend some more time taking a look at.

Also, I definitely to not have the investing "plan" down as good as I should. I am picking stocks mainly on feel here and although I do review the annual reports I am not doing any heavy analysis. I definitly have more work to do. One thing is for sure though, I spend several hours a day reading articles trying to do research at the various finance sites on the internet. Maybe i'm wasting my time but I am working on learning and becoming a better investor. The tips from those more experience than I am in this thread are appreciated, despite the tone of some of my posts in this thread. Thank you again for those who have taken the time to share their knowledge.

Reef · #93 06-13-2007, 12:21 AM

Shoe, you remind me of most people who want to quit their job to play poker. They think they have it all figured out and have a system. They even have a 'fall-back plan' of 3 months savings. But truth of the matter is that they don't have an established winrate and are most likely losing players. And of course end up busto

Shoe · #94 06-13-2007, 12:26 AM

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Shoe, you remind me of most people who want to quit their job to play poker. They think they have it all figured out and have a system. They even have a 'fall-back plan' of 3 months savings. But truth of the matter is that they don't have an established winrate and are most likely losing players. And of course end up busto

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Yes but most people who invest in the stock market don't end up busto. Most people make money, even the idiots who know nothing on average make money in the stock market. the same cannot be said for poker.

Evan · #95 06-13-2007, 12:32 AM

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Prop bet. I will not accept any bets without being offered odds. Just because I am confident in my ability does not mean I think a 1:1 bet is smart.

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The claim that was the basis for this entire idea, and you're putting $25k in borrowed money behind, isn't a 1:1 shot?

Evan · #96 06-13-2007, 12:32 AM

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even the idiots who know nothing on average make money in the stock market.

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Of course there's no way to actually verify this, but I really doubt you're right.

Edit: I want to clarify that I am talking only about idiots who take on an active investing plan. For obvious reasons, "idiots" who have their 401k or whatever invested in the s&p500 and never touch it have nothing to do with this discussion.

Shoe · #97 06-13-2007, 12:40 AM

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Prop bet. I will not accept any bets without being offered odds. Just because I am confident in my ability does not mean I think a 1:1 bet is smart.

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The claim that was the basis for this entire idea, and you're putting $25k in borrowed money behind, isn't a 1:1 shot?

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Not at all. Do you honestly believe I am either going to have $50k or $0 at the end of 1 year? Personally, instead of betting 1k I'd rather turn that into 1.2 - 1.5k over the course of a year and not have to worry about if I will get paid or not.

Also, I am not the one who initially brought up betting, not to imply the other guy(s) weren't serious. Just saying that it wasn't my idea to begin with.

Shoe · #98 06-13-2007, 12:42 AM

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even the idiots who know nothing on average make money in the stock market.

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Of course there's no way to actually verify this, but I really doubt you're right.

Edit: I want to clarify that I am talking only about idiots who take on an active investing plan. For obvious reasons, "idiots" who have their 401k or whatever invested in the s&p500 and never touch it have nothing to do with this discussion.

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Point taken. But stocks do go up over time. So are you saying everyone is just so bad at randomly picking stocks that they only pick ones that go down? That seems extremely unlikely to me, but I don't have any facts to back it up either. Perhaps they achieve below-average gains, but I would still think they make money.

Evan · #99 06-13-2007, 12:54 AM

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Prop bet. I will not accept any bets without being offered odds. Just because I am confident in my ability does not mean I think a 1:1 bet is smart.

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The claim that was the basis for this entire idea, and you're putting $25k in borrowed money behind, isn't a 1:1 shot?

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Not at all. Do you honestly believe I am either going to have $50k or $0 at the end of 1 year? Personally, instead of betting 1k I'd rather turn that into 1.2 - 1.5k over the course of a year and not have to worry about if I will get paid or not.

Also, I am not the one who initially brought up betting, not to imply the other guy(s) weren't serious. Just saying that it wasn't my idea to begin with.

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I honestly have no idea what you're talking about.

Evan · #**100** 06-13-2007, 12:59 AM

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even the idiots who know nothing on average make money in the stock market.

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Of course there's no way to actually verify this, but I really doubt you're right.

Edit: I want to clarify that I am talking only about idiots who take on an active investing plan. For obvious reasons, "idiots" who have their 401k or whatever invested in the s&p500 and never touch it have nothing to do with this discussion.

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Point taken. But stocks do go up over time. So are you saying everyone is just so bad at randomly picking stocks that they only pick ones that go down? That seems extremely unlikely to me, but I don't have any facts to back it up either. Perhaps they achieve below-average gains, but I would still think they make money.

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Dude, seriously, don't do this. First, I already explained this in an earlier post. Second, how can you possibly think 20% returns re easy but still have to ask this?