Taking out a prosper loan to buy stocks

[sillyarms]

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

[/ QUOTE ]

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.

[BradleyT]

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

[/ QUOTE ]

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.

[/ QUOTE ]

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.

[AbreuTime]

This feels like the latest installment of "Reason #27 that the current market may be overvalued: People wish to borrow at 12% to invest in stocks based on their history of success picking stocks (1 stock)."

Sometimes good companies' stock prices stagnate for a few years. Sometimes these companies' share prices drop if there is an overall market correction. Anything can happen, and it is overly optimistic to expect 25% returns. And TIME WILL NOT TELL if this decision is foolish. You could be lucky in the next 3 years and actually make money in this scheme; it's just that the odds are overwhelmingly against you, and you will LIKELY lose money, EVEN IF you were a great stock picker.

Shoe, I don't think anyone here can support your plan. Does that give you any pause?

[jba]

[ QUOTE ]
I am positive i can get at 20-30% annual return on my money by investing in individual stocks.

[/ QUOTE ]

PROP BET??? I'll bet up to 1k or so that you can't get 20% in the next year.

peace

[wdcbooks]

There are days when this forum really delivers. As an investment professional I am torn between cringing and laughing. A couple of points:'

1. Why do you keep ignoring the questions about margin? People are pointing out a less costly way for you to indulge your wacky investment plan.

2. Let us assume the market is wholly efficient. Because the OP is choosing just five stocks there is a not-insignificant chance that he will reach his goals by pure random chance. That prospect pains me.

3. I don't believe the academic research supports the idea of 'great' stock pickers. Even if they exist I feel perfectly comfortable saying that you are not one of them. I don't see how you could possibly have some insight into the correct pricing of a given security. Let's say, for example, you believe that Sony has a terrific product line and you see a groundswell of unexpected support for the PS3. How do you determine if that expectation is already priced into the price of the stock?

This is so much like playing something like roulette that I can't avoid the analogy. It is like some guy who is certain that black comes up far more often than it should so he borrows money to bet black fifteen times in a row. He will probably lose on the bet, he will certainly lose on the interest paid, but there is a small, but not miniscule, chance that he will end up ahead and continue to believe in his own genius.

[mal_noles]

Does it make me a terrible person for wishing this guy gets annihilated.

What was your point of asking this question if you werent going to listen to any feedback? Pulling the trigger with real money at stake is a lot tougher than paper trading what you think are hot stocks or have a "feel" for. I am sorry someone saying they can get 25% returns that have made one real trade is beyond laughable. Thank you for bringing some NVG level humor to this forum.

[Shoe]

[ QUOTE ]
[ QUOTE ]
I am positive i can get at 20-30% annual return on my money by investing in individual stocks.

[/ QUOTE ]

PROP BET??? I'll bet up to 1k or so that you can't get 20% in the next year.

peace

[/ QUOTE ]

I'd bet NTDOY alone goes up more than 20% in the next year. What type of odds are you offering?

[Shoe]

[ QUOTE ]
I still don't understand why you would not at least use margin. Do you even know what it is? You're saying you are buying blue chips. If you only borrowed 2/3 of your original amount you could get a better rate on the other 1/3 and deduct it.

Honestly I think you are a fool. Do you know remember or have never read about corrections or crashing? There was one earlier this decade and the market looks pretty pricey now. Of course your plan might work, then again you could bring all $25,000 to a craps table and put it all on don't pass and the shooter could toss snakeeyes on the come out.

[/ QUOTE ]

I am considering using margin as well. I only have about $4k of stocks currently though so I won't be able to take out very much on margin without this loan.

Thanks for the suggestions and advice all. I am listening to what you guys say but admit i was being overly-defensive last night.

I realize there are risks involved. I'm not looking to be completely diversified and just get an 8-10% return. I already have a 401k and Roth that I am being conservative with. I am looking to take on more risk for hopefully more reward (but I'm not going to be gambling with penny stocks or something here -- i'm still investing in well-established companies who I think will greatly outperform the market -- such as NTDOY) -- of course how I will do is up for debate and only time will tell.

[wdcbooks]

Shoe, I know I disparaged your plan, but I understand that you are going to do it anyway, and I don't think you will be dissuaded in any case.

I am really curious about one of my questions though. At its most basic level there are two questions that a stock picker needs to ask. First, does this company have strong future prospects? Second, is the security priced attractively in light of those prospects? I understand why you think you can tackle questions one, although I disagree. I have no idea what methodology you will be using to answer the second question though. How do you determine if a stock is over or under priced?

[Evan]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I am positive i can get at 20-30% annual return on my money by investing in individual stocks.

[/ QUOTE ]

PROP BET??? I'll bet up to 1k or so that you can't get 20% in the next year.

peace

[/ QUOTE ]

I'd bet NTDOY alone goes up more than 20% in the next year. What type of odds are you offering?

[/ QUOTE ]
I just want to make it clear right now that offering prop bets and then backing down will not be taken lightly in this forum. I'm not saying this has happened or will happen.