Key insights
- This post discusses using leverage (a personal loan) to invest in index funds. While the poster anticipates a positive return due to the difference between index fund returns and loan interest, it's a high-risk strategy, especially for someone fresh out of college. Market downturns could lead to losses exceeding the initial investment, and the fixed loan payments remain regardless of investment performance. This strategy is highly speculative and not generally recommended without significant financial experience and risk tolerance.
Does anyone have experience in taking a \~200k loan to invest in index funds? Where I’m from personal loans up to \~500k charge 2% per annum for up to 5 years.
Assuming that the average returns around 9-10% from a bunch of index funds, I’ll be able to gain the margin of 6-7% per annum.
I’m wondering if anyone has done this / can share their advice on whether this theory works in a real world setting.
Am fresh out of college so if this sounds silly, please kindly educate me on why it won’t work. Thank you!