topic Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage in General Credit Topics

Buying stocks on margin with 0% intro APR rate?/Arbitrage

Subexistence — Sun, 03 Jun 2018 18:57:51 GMT

Since credit cards have a 0% APR period I don't see why not delay CC payment to buy more stocks. For example Business Advantage Cash Rewards Mastercard has 0% APR for first 9 billing periods and doesn't report on your personal bureaus. If you put all your purchases on that card and only pay back the minimum for the first 9 months, then you have more to invest in stocks/index funds. Then once the 0% period ends, you pull needed money out of the market to pay it off. The stock market grows at 7% per year.

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

pipeguy — Sun, 03 Jun 2018 21:48:03 GMT

Very foolish move!

While the market may grow on an average of x-% per year buying on margin is high risk, borrowing money to buy on margin (which is also leveraged borrowing) is something much worse than "foolish" (limited verbiage due to MF rules). Want to watch your money grow? invest into a safe index fund or mutual funds or tax-free bonds - boring investments I know, but you won't go broke on a major market "correction" and you will watch your portfolio grow.

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

Anonymous — Sun, 03 Jun 2018 22:51:54 GMT

It's really important to read some basic books on investing before you try to do clever stuff. Specifically it's really important to take several months learning basic concepts like Risk and Reward -- and also learning the history of investing in the last 100 years. Even learning the last 11 years of investment history would enable you to learn about what happened in 2008, which would make you realize that all stocks do not inch forward at a steady 7%. Rather one can buy stocks tomorrow and have them worth far less than their purchase price a few weeks later.

Stocks on the whole have done remarkedly well (with some market dives, and cetain stocks doing very badly) in the last 8 years, but that means they have now become overvalued (in the judgment of many experts) and we may well be preparing for sharp market corrections or even a prolonged bear market.

Arm yourself with a basic conceptual understanding of investment and the markets, learn about the psychology of investment and its history as well, and then gradually become more involved in making concrete choices, avoiding anything that seems flashy or too clever by half.

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

SouthJamaica — Mon, 04 Jun 2018 01:39:00 GMT

@Subexistence wrote:
Since credit cards have a 0% APR period I don't see why not delay CC payment to buy more stocks. For example Business Advantage Cash Rewards Mastercard has 0% APR for first 9 billing periods and doesn't report on your personal bureaus. If you put all your purchases on that card and only pay back the minimum for the first 9 months, then you have more to invest in stocks/index funds. Then once the 0% period ends, you pull needed money out of the market to pay it off. The stock market grows at 7% per year.

Buying stocks on margin is gambling. It is extremely risky behavior. You are already borrowing to buy the stock.

If you borrow further, from a credit card, to buy stocks on margin, you not only may lose a fortune in the market once the margin calls start coming in, you'll have a big credit card debt to keep your margin debt company. Following your plan could be the shortest path to financial ruin.

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

Anonymous — Mon, 04 Jun 2018 01:45:11 GMT

@Subexistence wrote:
Since credit cards have a 0% APR period I don't see why not delay CC payment to buy more stocks. For example Business Advantage Cash Rewards Mastercard has 0% APR for first 9 billing periods and doesn't report on your personal bureaus. If you put all your purchases on that card and only pay back the minimum for the first 9 months, then you have more to invest in stocks/index funds. Then once the 0% period ends, you pull needed money out of the market to pay it off. The stock market grows at 7% per year.

Read something recently (sorry, don't have a link for you). Warren Buffett says (paraphrased), "NO NO NO NO NO NO NO!!!!!!"

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

HeavenOhio — Mon, 04 Jun 2018 07:52:22 GMT

@Subexistence, I recall a thread here a few months ago where the OP ended up with huge credit card debt (six figures, I think) due to using cards for investing.

The only way I'd submit that using a card is OK is if you used it for the convenience over using some other payment method. If you were to do that, I'd suggest paying the card balance as soon as the card company will let you — or at least as soon as you can get the money to pay into your card's payment account. Those events often coincide: make the charge, transfer the money to the appropriate payment account, and make the payment. In other words, the money should be within arm's reach.

And of course, there's the risk involved with the credit card lender. Paying only the minimum is considered risky behavior and is something that should only happen occasionally. I can't happen month after month.

And there's the question of whether or not banks are comfortable with this type of charge to begin with. Maybe it's a bad idea to use the card at all, even if it's paid off promptly. If you were to do this, ask the broker if customers typically use cards for transactions like this.

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

Hex — Mon, 04 Jun 2018 08:46:15 GMT

Yikes!!!

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

Subexistence — Mon, 04 Jun 2018 14:40:44 GMT

@Hex wrote:
Yikes!!!

Since everyone gave good advice with the unanimous no opinion, I will not proceed with this plan. I'm still interested in taking a HELOC when I get a house and investing that though due to low interest rates.

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

iced — Mon, 04 Jun 2018 15:12:49 GMT

@Subexistence wrote:
@Hex wrote:
Yikes!!!
Since everyone gave good advice with the unanimous no opinion, I will not proceed with this plan. I'm still interested in taking a HELOC when I get a house and investing that though due to low interest rates.

They're not so low anymore. Rates are 4% and rising, and a good return year is 7% but one can and often does worse. As rates continue upward, this will become a break-even endeavor with a decent chance of loss.

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

Anonymous — Mon, 04 Jun 2018 23:59:29 GMT

I’ll repeat the great advice others have given

this is a very bad idea. Never borrow to buy stocks

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

SouthJamaica — Tue, 05 Jun 2018 01:09:26 GMT

@Subexistence wrote:
@Hex wrote:
Yikes!!!
Since everyone gave good advice with the unanimous no opinion, I will not proceed with this plan. I'm still interested in taking a HELOC when I get a house and investing that though due to low interest rates.

I couldn't imagine a worse plan than the one you mentioned in your original post.

But you've come up with an even worse plan... borrowing against your home to buy stock. That would be a terrible move. You could lose your money and your home in one shot.

Re: Buying stocks on margin with 0% intro APR rate?/Arbitrage

wa3more — Tue, 05 Jun 2018 01:19:43 GMT

What south said.

This is a bad plan on steroids