Saving by borrowing?

[Ian H]

As a younger man I found it hard to save up so had an idea: Save up in reverse.

My idea was to borrow £10,000 and buy 10,000 Premium Bonds, my reason for thinking it was a good idea was:

- I found it impossible to save.
- I’d have £10,000 invested instantly.
- The loan payment would come out of my bank before I knew I had it.
- Money is fairly cheap to borrow.
- I could win a million.


Onto the maths, I could borrow £10,000 at 2.8% and pay back £178.64/month over 5 years. Total cost of borrowing £718.40.

At the end of the 5 years the £10,000 would be still there with any winnings on top.

If I borrowed the money and invested it differently would having the instant £10,000 (rather than saving £178/month and starting from £0.00) offset the cost of borrowing it over the 5 years?

 

[sodthisforfun]

Hello again!

Investing to borrow can be a good thing, if you think it's worth the risk and know your investment opportunities, but I don't think it's worth it in bonds. There is no guarantee that you would win any of the cash prizes so you're in the position of possibly paying out more in interest than you get in return. Bonds are a safe investment but with little return (for most).

As I already said, if saving is a real problem with you, paying each month a standing order into bonds is the same as paying back a loan. But you're not lining the pockets of the bank you took the loan out with and not putting yourself at risk if your circumstances change. You can stop a standing order at any time, but you can't stop paying back a loan if you need to.

 

[Ian H]

Well hello there x x x


If I did that I would for sure stop the standing order and spend it. If circumstances changed I could cash in the premium bonds within 4 days.

Is there another investment where £10,000 would make good money over 5 years?

 

[SammyInnit]

It's not a shocking idea. It's a gamble but not one like short selling shares. I lost £500 last year within half an hour gambling on Carillion stock. A friend of mine made £15k in 3 days on bit coin so it's a very tricky game to play. PBs are a lot less risky.

I'm sure once I read somewhere thoith when looking at long term loans, there's a stipulation that you can't use them to purchase bonds or other investments. I can't remember if that's exactly correct but I'm sure it was along those lines. Could be wrong.

 

[sodthisforfun]

Well hello there x x x


If I did that I would for sure stop the standing order and spend it. If circumstances changed I could cash in the premium bonds within 4 days.

Is there another investment where £10,000 would make good money over 5 years?

Yes you could cash in the bonds, but that would leave you with paid interest and nothing to show for it.

If you really think you'd stop the standing order and spend it then to me you shouldn't take out a loan! If your nature to not save is that strong, I don't think you should sign up to a loan which puts you at risk esp as you may be tempted to cash in your bonds as you go along before you paid it all back. £50 standing order to bonds is just a night out in the pub these days and at the end of it all, you've the satisfaction and pride that you've put it away. If you are lucky enough to win, you can invest that too, reaching your target of £10k quicker.

Am sure there are investments out there, shares etc. But they are risky. As I said, bonds are safe and you don't lose your money but there is little return (for most), shares etc aren't safe, can lose it but also have a higher return. Only invest what you can afford to lose in shares imo. If you've got to borrow it to invest it and aren't a natural saver, then you should think very carefully before signing up to a loan

 

[sodthisforfun]

It's not a shocking idea. It's a gamble but not one like short selling shares. I lost £500 last year within half an hour gambling on Carillion stock. A friend of mine made £15k in 3 days on bit coin so it's a very tricky game to play. PBs are a lot less risky.
.

Exactly. It's a game, it's a gamble.

Father in law has lost money on his saga shares, my dad also put a massive chuck of his retirement fund on shares and lost the lot. He had to go back to work for a while. Really should only invest what can afford to lose..

 

[EddieM]

https://blog.moneysavingexpert.com/2017/11/premium-bond-rate-boosted-1-15-1-4-pile/

Might be useful for you.

 

[ellal]

Just my tuppence worth...

Every investment is always a gamble, and you are more at risk if you don't follow a few rules.

Work out how long you want to invest, and when you want your investment to come to fruition.
You have to bear in mind that there will be periods of relative certainty and major uncertainty - we are currently most definately in the latter at the moment!
For some periods you may lose money, but in other periods gain.
Thus if you are in it for the short term, play safe. If you're in it for the long term you can afford to gamble.

If you can, always build up a 'reserve' and never touch it - a year's salary is a good measurement imo.

Spread your investments - several currencies/precious metals/property etc.
Some you'll lose on and others you'll gain.
(We've never gone down the private pension route as it's a con - too easily reneged on!)
It's also useful to have a couple of (legal) foreign bank accounts set up - remarkably easy to do when on holiday!
(it makes foreign currency dealings more profitable/easier)

Over the last 20+ years we've managed an average annual return of about 6%.
Some with cheap borrowed money (available to us, unlike the vast majority) and some with cash accumulated from previous 'investment gambles'.
Not enough to write a book entitled 'how I made my millions', but enough to pay for our 'plan' and far outstripping the usual standard investments/savings rates.

There is of course a dark (six lettered) cloud looming on our horizon, but we have hopefully planned as much as we can for that already.
(financially that is, but movement wise we are in the lap of the imaginary friends!)

 

[durhamplumber]

Just my tuppence worth...

Every investment is always a gamble, and you are more at risk if you don't follow a few rules.

Work out how long you want to invest, and when you want your investment to come to fruition.
You have to bear in mind that there will be periods of relative certainty and major uncertainty - we are currently most definately in the latter at the moment!
For some periods you may lose money, but in other periods gain.
Thus if you are in it for the short term, play safe. If you're in it for the long term you can afford to gamble.

If you can, always build up a 'reserve' and never touch it - a year's salary is a good measurement imo.

Spread your investments - several currencies/precious metals/property etc.
Some you'll lose on and others you'll gain.
(We've never gone down the private pension route as it's a con - too easily reneged on!)
It's also useful to have a couple of (legal) foreign bank accounts set up - remarkably easy to do when on holiday!
(it makes foreign currency dealings more profitable/easier)

Over the last 20+ years we've managed an average annual return of about 6%.
Some with cheap borrowed money (available to us, unlike the vast majority) and some with cash accumulated from previous 'investment gambles'.
Not enough to write a book entitled 'how I made my millions', but enough to pay for our 'plan' and far outstripping the usual standard investments/savings rates.

There is of course a dark (six lettered) cloud looming on our horizon, but we have hopefully planned as much as we can for that already.
(financially that is, but movement wise we are in the lap of the imaginary friends!)

6% return....could of made much more than that in buy to let..with v little risk

 

[JP_]

pay off more mortgage each month, rather than the loan payments, then more time to save before retiring.

 

[EddieM]

Just my tuppence worth...

Every investment is always a gamble, and you are more at risk if you don't follow a few rules.

Work out how long you want to invest, and when you want your investment to come to fruition.
You have to bear in mind that there will be periods of relative certainty and major uncertainty - we are currently most definately in the latter at the moment!
For some periods you may lose money, but in other periods gain.
Thus if you are in it for the short term, play safe. If you're in it for the long term you can afford to gamble.

If you can, always build up a 'reserve' and never touch it - a year's salary is a good measurement imo.

Spread your investments - several currencies/precious metals/property etc.
Some you'll lose on and others you'll gain.
(We've never gone down the private pension route as it's a con - too easily reneged on!)
It's also useful to have a couple of (legal) foreign bank accounts set up - remarkably easy to do when on holiday!
(it makes foreign currency dealings more profitable/easier)

Over the last 20+ years we've managed an average annual return of about 6%.
Some with cheap borrowed money (available to us, unlike the vast majority) and some with cash accumulated from previous 'investment gambles'.
Not enough to write a book entitled 'how I made my millions', but enough to pay for our 'plan' and far outstripping the usual standard investments/savings rates.

There is of course a dark (six lettered) cloud looming on our horizon, but we have hopefully planned as much as we can for that already.
(financially that is, but movement wise we are in the lap of the imaginary friends!)

Aside from the all private pensions are a scam comment how is investing taxed income a better investment than untaxed income.. You'd have to make a damn sight more than 6% for that to be worth it.

 

[Brigade77]

Just my tuppence worth...

Every investment is always a gamble, and you are more at risk if you don't follow a few rules.

Work out how long you want to invest, and when you want your investment to come to fruition.
You have to bear in mind that there will be periods of relative certainty and major uncertainty - we are currently most definately in the latter at the moment!
For some periods you may lose money, but in other periods gain.
Thus if you are in it for the short term, play safe. If you're in it for the long term you can afford to gamble.

If you can, always build up a 'reserve' and never touch it - a year's salary is a good measurement imo.

Spread your investments - several currencies/precious metals/property etc.
Some you'll lose on and others you'll gain.
(We've never gone down the private pension route as it's a con - too easily reneged on!)
It's also useful to have a couple of (legal) foreign bank accounts set up - remarkably easy to do when on holiday!
(it makes foreign currency dealings more profitable/easier)

Over the last 20+ years we've managed an average annual return of about 6%.
Some with cheap borrowed money (available to us, unlike the vast majority) and some with cash accumulated from previous 'investment gambles'.
Not enough to write a book entitled 'how I made my millions', but enough to pay for our 'plan' and far outstripping the usual standard investments/savings rates.

There is of course a dark (six lettered) cloud looming on our horizon, but we have hopefully planned as much as we can for that already.
(financially that is, but movement wise we are in the lap of the imaginary friends!)

You not actually an investor are you?

 

[JohnD]

Is there another investment where £10,000 would make good money over 5 years?

Mostly, a tracker fund with low charges (so not Virgin, for example).

As you'd expect, most professional fund managers fail to beat the index long term. So, I'm told, do most mug punters.

 

[ellal]

Aside from the all private pensions are a scam comment how is investing taxed income a better investment than untaxed income.. You'd have to make a damn sight more than 6% for that to be worth it.

If you read it again, you'll see I put "average annual return of about 6%"

Maybe I should have made it clearer that it was net not gross?

6% return....could of made much more than that in buy to let..with v little risk

You obviously know little of buy to let/risks!

You not actually an investor are you?

So maybe you could share with us your knowledge as to what would have given better average yearly returns over that period whilst mitigating the risks?

 

[Brigade77]

nonsense snipped

You talk nonsense & perpetuate that nonsense with yet more nonsense.

There is only one investment that has ever worked & it is something that is in common with almost every wealthy person you can think of.

This one investment's identity is totally & utterley beyond your comprehension because you cannot go there, you cannot do that & you certainly will never be able to mimmick it.

Maybe a few others will, but I bet you cannot even guess what it is.

What is the single thing that succesfull people invest in?