How much interest are you guys talking about for a student loan?
Btw the total max I am able to loan is about $30k spread evenly over three years, interest is currently 1.67% but guaranteed to remain lower than just about anything else no matter what. The inflation is vastly higher than the interest, it would not be very difficult to pay it back.
Also if I pass, some small part of the loan will be granted as a sort of scholarship, think it's possible to reduce the loan with about $6k just from that. If I do not take the loan I will forfeit the scholarship too, so it's just really stupid not to do it. It's meant as an incentive to make sure people get a proper education.
Like I said it really is a great opportunity for me, especially since I've never been able to free enough funds to actually invest in anything properly before.
Btw the total max I am able to loan is about $30k spread evenly over three years, interest is currently 1.67% but guaranteed to remain lower than just about anything else no matter what. The inflation is vastly higher than the interest, it would not be very difficult to pay it back.
Also if I pass, some small part of the loan will be granted as a sort of scholarship, think it's possible to reduce the loan with about $6k just from that. If I do not take the loan I will forfeit the scholarship too, so it's just really stupid not to do it. It's meant as an incentive to make sure people get a proper education.
Like I said it really is a great opportunity for me, especially since I've never been able to free enough funds to actually invest in anything properly before.
^^ If you do get your loan spend it smart. My sons wife worked while going to college and is the first in her family to get a college degree, a master's at that. CPA's next.
During our working days, there was a max percentage paid into an IRA/401, 7%-10%? I don't remember. Do this for 40 years and you have something in the end.
During our working days, there was a max percentage paid into an IRA/401, 7%-10%? I don't remember. Do this for 40 years and you have something in the end.
“I don’t think most people are in a position to pick single stocks,” he said during the Berkshire Hathaway annual shareholders meeting, which was held virtually this year from Omaha, Nebraska. “A few [are], maybe, but on balance, I think people are much better off buying a cross-section of America and just forgetting about it.”
"In other words, buy a low-cost index fund — Buffett recommends the S&P 500, which holds 500 of the largest companies in the U.S., from Google to Disney to ExxonMobil — and hold onto it for a long period of time."
https://www.cnbc.com/2020/05/22/warren-buffett-most-people-shouldnt-pick-single-stocks.html
Currently the limit is $6k (or $7k over 50) annually. And it's deducted from your taxable income (pre-tax).
Just checked a couple Norway-specific values.
Just doing very simplified Math, to check where are we standing today, just raw numbers, not considering trader fees and expenses (they work on commission of course) which can significantly erode "ideal" earnings.
From Norway Stock Market Index (Oslo Bors All-Share) https://tradingeconomics.com/norway/stock-market
From https://tradingeconomics.com/norway/inflation-cpi
So possible raw profit might reach 9.82-5.7=4.12%
Traders don´t work for free, supposing they take half of that (DO traders work for a full year bouncing stock here and there searching for best yields for as low as 2% ????? ...... I wouldn´t for such a pittance)
Leaving (best case) 2% net for you.
But you have to pay 1.7% for your "cheap" loan.
So this great investment scheme can yield around 0.3% yearly profit ... if all goes according to plan.
So your total U$30k loan can give you a grand profit of U$90 a year.
Even worse, MUCH worse, you don´t get the full U$30k up front, but U$833 a Month (U$30k spread along 3 years).
Great to help with monthly expenses (gas - food - whatever), useless for investing.
You are doing Financial Plans based on money you don´t have and won´t get, at least not in an investable form.
Now I see Government does not NEED to forbid or even check what are you using that money for, the way and quantities they manage make it useless for investments.
Best you could do with is is, besides everyday expenses (the intended goal), maybe buy a car or something and pay monthly using the loan, interest will be lower than regular financing.
Or, as others suggested, use that low interest loan to offset some of your higher interest mortgage ...or any other outstanding debt.
But not much beyond that.
Just doing very simplified Math, to check where are we standing today, just raw numbers, not considering trader fees and expenses (they work on commission of course) which can significantly erode "ideal" earnings.
From Norway Stock Market Index (Oslo Bors All-Share) https://tradingeconomics.com/norway/stock-market
From https://tradingeconomics.com/norway/inflation-cpi
So possible raw profit might reach 9.82-5.7=4.12%
Traders don´t work for free, supposing they take half of that (DO traders work for a full year bouncing stock here and there searching for best yields for as low as 2% ????? ...... I wouldn´t for such a pittance)
Leaving (best case) 2% net for you.
But you have to pay 1.7% for your "cheap" loan.
So this great investment scheme can yield around 0.3% yearly profit ... if all goes according to plan.
So your total U$30k loan can give you a grand profit of U$90 a year.
Even worse, MUCH worse, you don´t get the full U$30k up front, but U$833 a Month (U$30k spread along 3 years).
Great to help with monthly expenses (gas - food - whatever), useless for investing.
You are doing Financial Plans based on money you don´t have and won´t get, at least not in an investable form.
Now I see Government does not NEED to forbid or even check what are you using that money for, the way and quantities they manage make it useless for investments.
Best you could do with is is, besides everyday expenses (the intended goal), maybe buy a car or something and pay monthly using the loan, interest will be lower than regular financing.
Or, as others suggested, use that low interest loan to offset some of your higher interest mortgage ...or any other outstanding debt.
But not much beyond that.
Take the loan by all means. As you say, it depreciates in real terms. Although that only helps you if your income is inflation linked. Put it in a savings account.
The best fund is probably Buffett’s own: Berkshire Hathaway BRK-B. It consistently beats the S&P500 and it comprises a high amount in cash right now, ready to buy shares near the market bottom.
The best fund is probably Buffett’s own: Berkshire Hathaway BRK-B. It consistently beats the S&P500 and it comprises a high amount in cash right now, ready to buy shares near the market bottom.
It's $2k in August and January and $700 in the other months, nothing during summer.
That nets me a loss, savings accounts are barely over 0%.
I will consider funds, but I have no faith in that stuff based on previous experience.
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It seems impossible to buy a US fund as a Norwegian. Funds seem more or less exclusive to the respective countries.
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Yes, but even if the gain from the investments are "swallowed" by the inflation the loan is not. So you can basically sort of just take the interest off the loan from the inflation rate in your little calculation.
That should be 5.7-1.7=4
So: 9.82-4=5.82%
If I do NOT invest the money and just spend it blindly I would be stuck with a major net loss.
If I invest in my house for financial gain when we are at a peak in house prices and looking at a further crash with reduced market pressure it could possibly be less beneficial than if I upgrade the house to be more energy efficient to lower my cost of living further.
If I invest the money I could get a very good start at a mixed relatively low risk portfolio, and even if the dip lasts a year or two more the gains in 10 years time are much more likely to exceed the costs than not.
So the initial idea was a mix between minor energy efficient house upgrades and investments. Like previously mentioned I have already done the most costly energy reducing initiatives last year, so windows and/or wall insulation would be next, old house.
The biggest question is whether to start buying funds/stocks or getting new windows first, because like you mentioned @traderbam nobody knows where we are in the dip.
I'm willing to bet that when the ongoing war ends we are likely to see a recovery, it is not likely to be tomorrow, but it could happen in q3 sometime.
Edit:
Brainfart.
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I don't think it's possible for me to buy US funds at all, or are you talking about currency?
I am NOT betting for or against the USD, the USD is so expensive and volatile these days, no idea where it might go, USD cost is about equal to Euro for me right now. I see the Euro as a much more stable currency.
Trying to stay far away from the US justaboutanything, scary stuff, except perhaps a handful of tech companies like for instance I may buy back more stocks in AMD than the ones I've sold, I might get some stocks with dividend from companies based in Canada like BNS. Maybe I'll blend in some local green tech funds here in Norway, could also get some more stock in my trusty bank.
I am NOT betting for or against the USD, the USD is so expensive and volatile these days, no idea where it might go, USD cost is about equal to Euro for me right now. I see the Euro as a much more stable currency.
Trying to stay far away from the US justaboutanything, scary stuff, except perhaps a handful of tech companies like for instance I may buy back more stocks in AMD than the ones I've sold, I might get some stocks with dividend from companies based in Canada like BNS. Maybe I'll blend in some local green tech funds here in Norway, could also get some more stock in my trusty bank.
Sounds like you have started a good diversified plan. Depending on where you live in Norway, look up solar panels.
For non us folks; living in north of norway electricity is approx 1 NOK/kwh whilst south will experience up to 2-4 NOK/kwh.
I speculate that Norway will experience a downturn - or stay flat - because of our oil/gass and raw materials.
As mentioned in a previous post, lookup "investeringskonto". This account will allow you to buy foreign funds/stocks with the same tax benefits as "ASK". I have owned multiple US/canadian stocks at the same time as norwegian stocks within the same account.
Debt can be a tool and a curse, depending on how you use it and how much leverage you take.
Even if im able to payoff my loans (student + house), I keep them invested as they have brought good returns the last 2 years. Fixed half of my housing loan for 10 years only 6 months ago. I intend to create wealth with the loans and use my salary to manage downpayments. As long as my investments yields a higher return than the interest, I will stick to my plan.
Investing in US stocks -- at the moment sentiment is very dark with fund managers experiencing the same funk seen in 2008 and March of 2020. You're also on the wrong side of Federal Reserve monetary tightening. Saying this, there are a tremendous number of consumer and tech companies which will weather an economic downturn.
Green Funds -- outperformed as fund managers were selling energy, mining stocks. Then reversed. A growing sentiment in the US is that "Green" may have passed its prime.
Good advice with respect to Buffet's "BRK.B", Buffet doesn't own the hyper-valuation companies which dominated the S&P500 (up until the past few months):
Attachments
@Medisinmannen Will consider getting some solar panels for the other side of my roof, but that will be not be this year, small house with east/west roof and more sun on the east side because of terrain so that's where we have the solar panels now. Got 30kWh so far today because it was a bit cloudy in the morning, good days are just over 40kWh.
Windows will be cheaper and may net the same savings as solar panels can generate YoY, so I might do windows next spring and focus on stocks this semester.
Yes, I buy stocks, but I am not sure buying funds is possible?
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@jackinnj I think green funds have a bit of potential here in Europe because of the shift in focus, the increase in fossil fuel cost is a big driver for this and ACER also helps a lot. The Norwegian government is going to aim for a neutral carbon footprint in the near future.
Windows will be cheaper and may net the same savings as solar panels can generate YoY, so I might do windows next spring and focus on stocks this semester.
Yes, I buy stocks, but I am not sure buying funds is possible?
edit:
@jackinnj I think green funds have a bit of potential here in Europe because of the shift in focus, the increase in fossil fuel cost is a big driver for this and ACER also helps a lot. The Norwegian government is going to aim for a neutral carbon footprint in the near future.
Yes, either an index fund, or a higher performing mutual fund. Most people have neither the time or inclination to successfully select and manage their own portfolio of individual stocks. They definitely should be in the stock market, however, but via some type of index fund or some mutual fund. Also, so-called, managed funds are available, which are where, a professional manages a selection of stocks specifically for you. However, as I recall, you need to invest a minimum of $25K to make that worth the effort for investment management firms.
I'm wondering why do you advise that, as you appear to know something about the subject. Putting it in a savings account, with their extremely low interest rates, is a sure place to watch it lose it's purchasing power, especially with inflation on the rise. Perhaps, you did not mean a bank savings account?
Berkshire-Hathaway has long, long been one of the best equity funds. I always get a laugh, whenever I see the per share price of it, though. $405,000 per share, as of today. I remember also laughing at the per share price many years ago when it was 'only' $50,000. Warren has indicated this is to limit the involvement of smaller, less experienced, investors. Yeah, I should say so.
I meant a savings account that pays more interest than the student loan. Or a similarly guaranteed investment vehicle. I don't know what the rates are in Norway but they are rising in many countries. But you are right that this is not a worthwhile investment, rather it's somewhere to park the money.
Berkshire has two listed shares BRK-A and BRK-B. The latter is an affordable slice of the pie and is currently priced at about $265 usd.
Berkshire has two listed shares BRK-A and BRK-B. The latter is an affordable slice of the pie and is currently priced at about $265 usd.
UK resident here, many years ago my sister got a student loan with low interest, but then the interest went up, but she couldn't transfer the loan, are your sure the same won't happen to you? Many years later, and I meet a few students, they spend their student loans like water, it's truly shocking - but in the UK the repayments are done through taxes, so if you don't repay, it's people like me who'l bail them out. I've known one person who did well on the stock market, he started in his 50s and invested in the field that he was an expert, and had a lot of contacts in. You might as well buy up copper or flour.
Okay, so I have been trying to look around a little bit, and it might be easier for me to just join "The Motley Fool" and simply buy the recommended 2 stock picks each month.
It would reduce the amount of time and work needed to stay in the game by a significant amount, and at the same time I would be a little bit more likely to make some half decent choices.
Any thoughts on this?
Are there other services of equal quality that should be considered?
It would reduce the amount of time and work needed to stay in the game by a significant amount, and at the same time I would be a little bit more likely to make some half decent choices.
Any thoughts on this?
Are there other services of equal quality that should be considered?
Legal and moral issues aside, it is a really bad idea to borrow money to invest. You can look up how leveraging works for some horror stories.
Your investment strategy should be driven by your investment goal, risk tolerance, and time horizon. These determine your asset allocation, i.e., the mix of stocks, bonds, precious metals, real estate, etc. in your investment portfolio.
You can't time the market so don't try. Even the pros who are paid well to do this sort of stuff for a living usually don't beat the market for any length of time. Go with a couple of index funds. They're not racy, but their management fees are extremely low. Usually an index fund has a management fee below 0.1% whereas the fee for a managed fund is a few percent. Remember that you pay capital gains tax on all gains (i.e., the gains before the management fees are deducted), so if your capital gains tax rate is, say, 50% and the difference in the management fee between the index fund and the managed fund is two percentage points, your managed fund needs to consistently beat the market by 3% (2% for the manager, 1% for taxes) to provide the same return as the index fund. Few do that.
Vanguard in the US has a lot of investment advice. They specialize in index funds, so they're obviously biased. But their advice is good (IMO).
Funds are a way to diversify your portfolio, thereby hedging against market volatility. Now, this does require that the fund is diversified across many sectors. It's easy to look at Apple, Tesla, whoever and say "wow, had I invested then I would have had..." But both of those companies took years to grow. Decades in Apple's case. What if you needed the money in the meantime? As my dad used to say, "it would be nice if we could trade stocks at yesterday's prices".
Tom
Your investment strategy should be driven by your investment goal, risk tolerance, and time horizon. These determine your asset allocation, i.e., the mix of stocks, bonds, precious metals, real estate, etc. in your investment portfolio.
You can't time the market so don't try. Even the pros who are paid well to do this sort of stuff for a living usually don't beat the market for any length of time. Go with a couple of index funds. They're not racy, but their management fees are extremely low. Usually an index fund has a management fee below 0.1% whereas the fee for a managed fund is a few percent. Remember that you pay capital gains tax on all gains (i.e., the gains before the management fees are deducted), so if your capital gains tax rate is, say, 50% and the difference in the management fee between the index fund and the managed fund is two percentage points, your managed fund needs to consistently beat the market by 3% (2% for the manager, 1% for taxes) to provide the same return as the index fund. Few do that.
Vanguard in the US has a lot of investment advice. They specialize in index funds, so they're obviously biased. But their advice is good (IMO).
Funds are a way to diversify your portfolio, thereby hedging against market volatility. Now, this does require that the fund is diversified across many sectors. It's easy to look at Apple, Tesla, whoever and say "wow, had I invested then I would have had..." But both of those companies took years to grow. Decades in Apple's case. What if you needed the money in the meantime? As my dad used to say, "it would be nice if we could trade stocks at yesterday's prices".
Tom
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