You seem to be willing to take risks. The issue becomes how much risk.
One fellow I know thought to invest in stocks. His first broker had him invest in stock futures with the argument that when you are buying a stock you are betting it will go up in price, with just buying a future you are making the same bet, but have much greater returns. Of course he lost all of his money when the futures went down and he had no reserve to handle the call.
So you seem cognizant of the risks of owning stocks. Downside is that you can lose some money, but you seem to have enough assets to handle a loss. Upside is that you can make money and naysayers ignore that overall the stock market does go up more than inflation.
I suspect you are aware for everyone who gets a tenfold return quickly, there are more than ten who have significant losses.
My advice is still to invest in companies that you are familiar with besides the required published data and news stories.
One fellow I know thought to invest in stocks. His first broker had him invest in stock futures with the argument that when you are buying a stock you are betting it will go up in price, with just buying a future you are making the same bet, but have much greater returns. Of course he lost all of his money when the futures went down and he had no reserve to handle the call.
So you seem cognizant of the risks of owning stocks. Downside is that you can lose some money, but you seem to have enough assets to handle a loss. Upside is that you can make money and naysayers ignore that overall the stock market does go up more than inflation.
I suspect you are aware for everyone who gets a tenfold return quickly, there are more than ten who have significant losses.
My advice is still to invest in companies that you are familiar with besides the required published data and news stories.
Risk assessment, and liquidity contingency planning are, of course, your responsibility. I'll simply assume that you know what you are doing in making investments, else, you would be a fool to risk any amount of significance. That said, my primary concern was over the legality of utilizing a taxpayer backed, low-interest student loan toward financial markets investment. You state that you are not doing anything illegal. You had better be correct about that.
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There have been many discussions about the many ways that this could go wrong from an economic perspective, and most are very real possibilities with an unquantifiable risk factor in today's crazy unstable world.
There have been no discussions about the very real very large obstacle that you will face, the engineering degree itself.
I walked into a Motorola plant in 1972 at the age of 20 and got a job on the assembly line assembling and tuning two way radios for the public safety (police fire and military) market. The plant was new in 1972 and employed several hundred people. All of the products made there were purchased with taxpayer dollars, so the plant itself went through several up and down cycles that tracked the general economy. By the mid 80's I had found my way into an engineering job without an engineering degree. There were a few others like me who had done the same, but it became obvious to some of us that we were endangered species, the first to be let go when there was a downturn, with virtually no way to return when better times returned. The plant had expanded to nearly 5000 people, then contracted to a much smaller size several times during my employment and does not exist today. One of my bosses explained that going to college to get an engineering degree would be my best defense against becoming another unemployed statistic. As much as I had resisted this my entire life, I and a few of my friends accepted the inevitable, and set out to find the shortest path to obtaining an "engineering degree."
Motorola had a company sponsored education plan that was essentially a reverse of what you are being offered. The employee must submit a program of study from an approved college. Once approved, the employee would pay for one or more classes up front which would be reimbursed in full upon completion of each class with a grade, of "C" (80% score) or better. I put each class on a credit card which was paid off after completing a class. There was no time limit for completing the degree, but as with all company policy, it could be amended or revoked at any time. It lasted until about 2005 though.
Seven people started the quest by filling out applications, and getting info from every college or "approved institution" within driving distance of where we lived. Five of us actually started school at the same college because they had engineering classes that were taught at night. Of those five, only two of us survived the first year. I was the only person to finish all of the coursework and walk away with a Bachelor's Degree in computer engineering.
You mentioned fulfilling your education in 3 or 4 years. You also mentioned somewhere in this thread that you are supporting a family. An engineering degree in an electronics related field is not easy. Getting a 4 year degree in 4 years or less while supporting a family is nearly impossible, but obviously doable since I did it. I went to class 4 nights a week from 6 PM to about 10 PM. I did homework for most of the weekend. Fortunately my wife and daughter supported me in this endeavor, because it would have been impossible otherwise. The small private school we chose gave us credit for some of the old classes we took in our past, so I had about 1 year's work of educational credit from my first attempt at college in 1970. These were three of the most difficult years of my life, as there was NO free time. Looking back the education itself (and the second degree I got later on my terms) provided the path for a 41 year engineering career at Motorola with a decent salary. The education allowed me to advance my career much faster than I would have without it. Things would likely been far different if I had not gone down this path.
If you go down this road make sure you know and understand all of the rules imposed by the loan, and by the educational institution up front. What are the penalties for failing to pass a class? What are your obligations if you start school, but do not finish your degree? Are there any time requirements? Every educational institution has different rules, and some have time limits even for their own classes. The school where I later got a masters degree in electrical engineering declared some of their courses "irrelevant" or "obsolete" after six years, so those courses could no longer be applied towards a degree. This was basically a money grab. Some courses may need a refresh with time but the fundamentals have not changed.
I started out by taking one class that I knew that I could pass blindfolded. This turned out to be a very good idea since I had not been in a classroom in 20 years. The next term I did two, and eventually four when they were relatively easy classes. When everyone around you is 18 to 22 years old, and partying on daddy's money is their primary objective, it's not hard to do 10% better than they do, especially when you already understand electronics. I did very well at my second attempt at college. The 1970's attempt when I WAS 18 resulted in me becoming mathematically impossible to graduate, so I got the job at Motorola.
I succeeded and got my computer engineering degree at age 40. Once I worked my way into a research group at Motorola they started pressuring me to get an "advanced engineering degree." I did get a Masters Degree in Electrical Engineering at age 47 after six years of taking a class or two whenever I found something I liked or it fit my schedule.
Whatever you do with the money is up to you, but it should be something that does not require daily, or hourly attention as life and schoolwork will have 110% of your attention. You mentioned a mortgage. If your mortgage allows early payments directly on the principal amount, and your interest rate is higher than the loan rate, do the math to see how much could be shaved off of the total cost of your house if some of the principal amount is paid off early. I bought my house in 1979 when interest rates were 8.5%. Paying extra small amounts toward the principal early in the loan saved me almost 35K on a 40K loan which would have cost me about 140K if I just made all the regular payments on schedule over 30 years. This is a safe "set it and forget it" strategy with a positive yield. I don't know how it works today though.
During the "day trading" days of the late 90's and early 2000's it was possible to make money by buying a stock during lunch New York time, then selling a couple hours later as the trading volume (and price) picked up. 10 cents a share adds up on a $3 stock if you trade several thousand shares a day and do it every day. I had to explain this situation carefully to my boss so that he wouldn't schedule any 1PM meetings. This required a job where you were sitting in front of the computer, with one eye on the real time trading window, and your boss is in on it. We found other cyclic events with a daily, weekly or other period that allowed for nearly foolproof gains, but there could be some real news that changed the game fast......those days are gone forever though.
There may be an option somewhere in between these two extremes, but market conditions change far too fast for me today, so I don't play the game any more.
I must respectfully say that from the tone of your comments you don't have the slightest idea what you're doing. I don't think you know what the market really is. It's not what it used to be even 15 years ago. Even with a large correction, prices are pie in the sky and don't reflect any kind of reality. Rehypothecating rehypothecated bundles of junk is what the market is today. There's many layers between the market and reality.
One of my friends made a living as a local trader on the CBOT. About 15 years ago he retired early. He said there was no money to be made for locals any more. All the money flows from one behemoth institution to another. No more middleman. He was grooming his son to take his place in the pit but that was sidelined. The party's over for the little guy.
I worked at the CBOT and CME for 25 years. I had big clients and little clients. I was barred from trading because I saw the orders before they hit the market; if I traded it would have been "insider trading." But I was still able to legally invest through funds and I made over $2 million in 20 years. Then it all disappeared when an underwriter (Lehman) went under and all the trillions of dollars they had on their books vanished literally overnight. It was little guys like me that were left holding the ball while the banksters were made as whole as possible with the capitol that was left. In the end I recovered $8000.
One of my friends made a living as a local trader on the CBOT. About 15 years ago he retired early. He said there was no money to be made for locals any more. All the money flows from one behemoth institution to another. No more middleman. He was grooming his son to take his place in the pit but that was sidelined. The party's over for the little guy.
I worked at the CBOT and CME for 25 years. I had big clients and little clients. I was barred from trading because I saw the orders before they hit the market; if I traded it would have been "insider trading." But I was still able to legally invest through funds and I made over $2 million in 20 years. Then it all disappeared when an underwriter (Lehman) went under and all the trillions of dollars they had on their books vanished literally overnight. It was little guys like me that were left holding the ball while the banksters were made as whole as possible with the capitol that was left. In the end I recovered $8000.
And rehypothecation means they use YOUR assets as collateral for THEIR risk profile. Then, someone else uses those same assets as collateral for their risk profile. And on and on and on....
This means that any exposure you have in the market is going to be exposed to an upside down pyramid of hidden risks, and if ONE investor makes the slightest mistake then YOU lose every penny. You have no idea who's using your assets for collateral and no control over how they use those assets. When the pyramid collapses, there's maybe only 5% of the actual assets required to cover the losses.
I can't make this stuff up. I saw it all unfold in real time.
This means that any exposure you have in the market is going to be exposed to an upside down pyramid of hidden risks, and if ONE investor makes the slightest mistake then YOU lose every penny. You have no idea who's using your assets for collateral and no control over how they use those assets. When the pyramid collapses, there's maybe only 5% of the actual assets required to cover the losses.
I can't make this stuff up. I saw it all unfold in real time.
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Two guys who've been in the market for a very long time and have the emotional attitude needed to be successful and sane is Warren Buffet and Charlie Munger. They've also been happy to share their advice with the public. There are no magic tricks. Some of the take aways I remember (correct me if I'm wrong):
Don't bet against the US - market will go up over long term
Don't invest outside your circle of competence - average Joe should by an Index Tracker
If you buy individual companies you buy them because you want to own them and you sell only because a) you lose confidence in the leadership of the business, or b) the market for that business changes to a death spiral, or c) you have a better opportunity somewhere else for your money.
My personal advice: never borrow money to invest in risky assets - the number of people who are suited to this are too few.
Don't bet against the US - market will go up over long term
Don't invest outside your circle of competence - average Joe should by an Index Tracker
If you buy individual companies you buy them because you want to own them and you sell only because a) you lose confidence in the leadership of the business, or b) the market for that business changes to a death spiral, or c) you have a better opportunity somewhere else for your money.
My personal advice: never borrow money to invest in risky assets - the number of people who are suited to this are too few.
IMPRESSIVE Life and Career course concentrated in a single Forum post.
As a bonus, safe (as safe as possible) Investment advice, which anyway mostly boils down to "do not get in the game" and "do better things with that money instead".
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@Medisinmannen I'm too old for BSU, used it on my mortgage already.
George et al. are correct about me not having time for active trading, the idea was to have some different stocks that will beat inflation over time, possibly with some dividend stocks mixed in.
So not even thinking about being an active day trader, not my kind of thing and there's no time.
Yes, this is the core of it. Good advice about familiar companies.
I am well aware of the fact that all my free time is gone for the foreseeable future, pretty sure I mentioned that already. Btw I'm turning 40 this summer so I guess we are on the same kind of life schedule or something.
I am not claiming to have any idea whatsoever, I am seeking knowledge and advice.
George et al. are correct about me not having time for active trading, the idea was to have some different stocks that will beat inflation over time, possibly with some dividend stocks mixed in.
So not even thinking about being an active day trader, not my kind of thing and there's no time.
So you already have enough money for school expenses without the loan?
And you would use the loan money for other purposes?
And you will be able to spend enough time on school to make it worthwhile?
And you would use the loan money for other purposes?
And you will be able to spend enough time on school to make it worthwhile?
Yes.
Yes. Especially so because it's cheaper than my current loan, I would benefit even using the student loan to repay my mortgage.
This particular school is part of a system specifically intended for currently active professional workers. The whole thing is intended to be in addition to a full time job, that is not saying it will be easy going, but they stretch it out a year extra compared to if you study full-time.
Yes. Especially so because it's cheaper than my current loan, I would benefit even using the student loan to repay my mortgage.
This particular school is part of a system specifically intended for currently active professional workers. The whole thing is intended to be in addition to a full time job, that is not saying it will be easy going, but they stretch it out a year extra compared to if you study full-time.
Then if you discuss the circumstances with the loan decider and they approve,
and you can pay the loan back as required without damaging your credit rating,
there should be no downsides. But this will be a long term commitment requiring
persistent effort. And you should have health and property insurance for contingencies.
and you can pay the loan back as required without damaging your credit rating,
there should be no downsides. But this will be a long term commitment requiring
persistent effort. And you should have health and property insurance for contingencies.
That’s because people in the USA are conditioned to spend every dime they can get their hands on. If you do that you can NEVER get ahead. The only proven method to do so is to live on less than 50% of what your job provides.
Of course, but if I just select some relatively safe stocks with dividend such as for instance BNS the potential is significantly higher. Every time there's been a dip in the market up to this point in time it bounces back to a higher level than before the dip, while nobody really knows if we are at the beginning or the end of the current dip we do know that we are somewhere in a dip. So I am fairly confident that if I put my funds in stable, good companies that have the means to survive this, it is likely the value increase will exceed the inflation we are facing at the moment.
Not so much conditioned, as driven by necessity. Many working Americans income is at the poverty level. There is no way for them to live on 50% of their net job income because they hardly survive on 100%. Besides, that 50% figure is just some rule-of-thumb, whereas a proper plan has a specific retirement income goal (which is based on one’s desired retirement lifestyle), and the date when one would like to retire. The greater the retirement income goal, or the sooner the retirement target date, the more risk has to be incurred in the plan to meet those. The lower the income goal, and the longer the retirement date, the less risk. Obviously, the younger one starts on a retirement plan, the less investment risk they must incur. Time, has a great non-linear investment income multiplying effect, due to compounding.
Whether or not it’s practical to live on say $15k a year while making 30 doesn’t change the fact that it’s what it takes to get ahead. If you spend every dime of that 30k it’s paycheck to paycheck. Saving a hundred bucks every now and again won’t really help either - there is always some unexpected expense that comes along unless there is enough of a reserve to simply overwhelm it and have something left when it’s over. The fancier your lifestyle, the higher those unexpected expenses tend to be. A new derailleur, cable and cassette cost less than overhauling the transmission in a 10 year old Nissan.
Taking out large loans, even to go to school, isn’t really a very smart idea. How much of the $100k student debt a grad who is underwater on was used to actually pay for classes, and how much to “maintain a lifestyle” while going to school? Not much different than paying for consumer items or upscale apartment rent with a credit card. Eventually all that becomes due. If the debt were just the $20k cost of tuition, the payments might be more manageable on the McJob he has to settle for.
Someone actually thinking about investing is at least a little further ahead of the game. But from personal experience, my portfolio went absolutely NOWHERE until the mortgage was paid off. Then there was money to invest, and finally the cushion needed to overwhelm those unexpected expenses. Money started piling up. Debt kills, period. Get rid of the debt first - it follows one around even in down markets.
Taking out large loans, even to go to school, isn’t really a very smart idea. How much of the $100k student debt a grad who is underwater on was used to actually pay for classes, and how much to “maintain a lifestyle” while going to school? Not much different than paying for consumer items or upscale apartment rent with a credit card. Eventually all that becomes due. If the debt were just the $20k cost of tuition, the payments might be more manageable on the McJob he has to settle for.
Someone actually thinking about investing is at least a little further ahead of the game. But from personal experience, my portfolio went absolutely NOWHERE until the mortgage was paid off. Then there was money to invest, and finally the cushion needed to overwhelm those unexpected expenses. Money started piling up. Debt kills, period. Get rid of the debt first - it follows one around even in down markets.
It’s not about some undefined, “getting ahead”. It’s about investing to attain a comfortable retirement by some retirement date. Which won’t take half your income unless, you either started investing very late relative to when you would like to retire, or you wish to live an extravagant lifestyle upon retirement. Your rule-of-thumb figure applies only to very specific and difficult circumstances.
This falls under the fact that you don’t want to use loans/credit to pay living expenses. You can only fall increasingly behind once the loan payments start. Increasingly, ‘robbing Peter to pay Paul’.
This statement appears to actually make my earlier point. At some lower income level, people are struggling merely to survive, and don’t have excess funds to invest significantly. As you recount via your personal experience of not being able to significanly invest until adiddional funds became available from having paid off your mortgage. Many Americans are in this category. Yes, many make bad spending choices, but many others are just swimming to keep their family from drowning. The big advantage of investing even in small amounts is that it gets people in to the habit of investing, so that if their funding situation significantly improves they will already have the right habits. Also, the earliest investments benefit the greatest from compounding.
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