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Should I dip into my HELOC to buy?
10-13-2008, 11:43 AM
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#1
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Recycles dryer sheets
Join Date: Sep 2007
Location: near L.A.
Posts: 302
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Should I dip into my HELOC to buy?
I have a HELOC account with a credit union($100k limit) which I never touched, interest rate is prime minus .25% I think(need to check, haven't looked at it for a long time). with the market as low as it's, I'm thinking tapping into this $(maybe 10K to 20K) to dca into my Target Retirement and a couple other funds.
do you think this is a sound idea? I'm already maxing out my 401k, IRA and all my monthly savings(anywhere betwn $500 to $1500) are going into the market(so need more investment $).
some quick stats:
35 yo, 2 kids, wife-SAHM, income: slightly under $100k. job seems fairly secure, but who knows.
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10-13-2008, 11:46 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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 Quote:
Originally Posted by ER_Hopeful
...do you think this is a sound idea?
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Everyone has their own risk tolerance. Borrowing against my house to buy stocks is far beyond mine. I would not do it.
__________________
Numbers is hard
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10-13-2008, 11:47 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,450
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Sure....why not. Support us all in getting our account balances back up... 
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- Hurry! to the cliffs of insanity!
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10-13-2008, 11:48 AM
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#4
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Give me a museum and I'll fill it. (Picasso)
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Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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If you had a fully paid off home, owned free and clear, would you mortgage it in order to invest?
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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10-13-2008, 11:49 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 4,204
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I was just thinking about the 'Pay off the House threads'. I wonder how many of those in the 'keep a large mortgage' and invest in stocks are feeling now. More to the point I wonder how their wives feel! Especially if there homes or under water!
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10-13-2008, 11:50 AM
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#6
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Give me a museum and I'll fill it. (Picasso)
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Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by REWahoo
Everyone has their own risk tolerance. Borrowing against my house to buy stocks is far beyond mine. I would not do it.
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Same here.
At least one mildly refreshing thing about this question is that it's not being asked with the market at an all-time as it usually is. While I still wouldn't do it, it's at least good to see people going contrary to the fear reaction and thinking about accumulating stocks when they are cheap and not when they are in a bubble.
I wouldn't ever borrow to invest, and especially not by putting my house up as collateral.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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10-13-2008, 11:51 AM
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#7
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Recycles dryer sheets
Join Date: May 2008
Posts: 479
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35 yo, 2 kids, wife-SAHM, income: slightly under $100k. job seems fairly secure, but who knows.
==============
There is risk, and there is RISK. Read what you posted above and tell me if it is a smart move.
Me, I say not.
ta,
mews
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10-13-2008, 11:53 AM
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#8
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Moderator Emeritus
Join Date: May 2007
Posts: 12,901
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I vote NO. I think that borrowing money to invest in the stock market is a big mistake especially if your income is only "fairly" secure. Even Warren Buffet thinks it's unadvisable to invest borrowed money. If you want to invest more money in the market, either cut your expenses or increase your income.
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10-13-2008, 12:00 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Oct 2004
Location: Portland
Posts: 2,038
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Another vote for no. I'd rather be building up cash reserves in your shoes. I think we are going to experience a lot more job loss before things get better.
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10-13-2008, 12:07 PM
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#10
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Give me a museum and I'll fill it. (Picasso)
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Join Date: Jul 2006
Posts: 11,401
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Definitely, absolutely not within my risk tolerance. YMMV.
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10-13-2008, 12:34 PM
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#11
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,859
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Quote:
Originally Posted by ER_Hopeful
do you think this is a sound idea?
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I think you should only do this when the market's at a bottom.
I've called the bottom at least six times in the last year. How many times do you think you'll be able to call the bottom?
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10-13-2008, 12:36 PM
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#12
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Recycles dryer sheets
Join Date: Jan 2008
Posts: 148
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Absolutely......not.
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10-13-2008, 12:42 PM
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#13
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Recycles dryer sheets
Join Date: Sep 2007
Location: near L.A.
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ok, I guess that wasn't such a good idea after all. I'm glad I ran it by you guys first. Greed can make you do stupid things, you know.
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10-13-2008, 12:48 PM
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#14
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by ER_Hopeful
ok, I guess that wasn't such a good idea after all. I'm glad I ran it by you guys first. Greed can make you do stupid things, you know.
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Aubrey McClendon a formerly very rich and a very sharp gas finder got sold out of his huge poosition in CHK, the company that he founded because he was carrying his position with debt. The stock is up huge today, but McClendon is not.
Since this can happen to the guy who runs the company, what chance do we have?
Remember too, that while it is nice to have the markets going up for a change, this doesn't say much about what comes next. If you can get one thing right- valuation- you will do fine. If you try to get both valuation and timing right you are very likely to lose.
ha
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10-13-2008, 12:59 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Apr 2006
Posts: 1,490
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this sounds like a great idea for anyone who doesn't find the stock market (or life in general) to carry sufficient risk
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10-13-2008, 01:09 PM
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#16
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Recycles dryer sheets
Join Date: Jan 2008
Posts: 148
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Quote:
Originally Posted by haha
Remember too, that while it is nice to have the markets going up for a change, this doesn't say much about what comes next. If you can get one thing right- valuation- you will do fine. If you try to get both valuation and timing right you are very likely to lose.
ha
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well said!
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10-13-2008, 01:09 PM
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#17
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jan 2006
Posts: 5,350
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Quote:
Originally Posted by ER_Hopeful
ok, I guess that wasn't such a good idea after all. I'm glad I ran it by you guys first. Greed can make you do stupid things, you know.
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I wouldn't say it's "stupid", just very risky. The upside could be big but as the sole earner supporting 4 people I think it's too much risk. I wouldn't do it. It seems like your doing well already why take on so much more risk?
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10-13-2008, 01:14 PM
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#18
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Or put another way: Stocks are risky enough when you're NOT going into debt to buy them and putting your home on the hook for losses. Imagine how risky they are when you *are* doing those things.
Yes, valuations are attractive now in the long term, but don't forget the old saying: The market can stay irrational longer than you can stay solvent. Capitalize that, bold face it and say it three times when it involves mortgaging yourself to the hilt in order to buy.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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10-13-2008, 01:40 PM
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#19
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,498
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No, no, a thousand times no!!
If you had decided to invest HELOC money, you would then have had monthly payments due on that principal. So, I would suggest that each month you invest THAT money since you won't have to make any payments.
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Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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10-13-2008, 02:04 PM
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#20
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Recycles dryer sheets
Join Date: Sep 2007
Location: near L.A.
Posts: 302
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DOW is up 917 pts as we speak,  Wish I had more to invest last week(this is what drove me to the idea). Gotta stop watching the finance site.
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