Student Loans + Mutual Funds

Beretta said: "I'll start off by introducing myself. My name's Matt, I'm 18 and I'm just starting to get into this whole investing thing. My father is an accountant and already has been investing my money for me, but now that I'm 18 I feel it's my responsibility to handle my own money and start making my own investments. I will be attending the University of North Dakota, Grand Forks next year and because of academic scholarships I will be paying just about 6 grand a year total, which I will have no problem paying. I have recieved several offers in the mail recently regarding student loans, and it got me thinking. This may be a completely stupid idea, but I'd like to get some insight on it. My idea is to take out a $20,000 student loan at a fixed interest rate of about 6% and invest it in a mutual fund. I will be in school for about 6 years and when I graduate I will begin paying off the loan and will hopefully have a steady job. I wouldn't touch the fund for 35 - 40 years or until I was ready to retire. At a rate of 7% my investment would double every 10 years, leaving me with somewhere around $320,000. My question is, would this be a sound investment, and am I calculating this right? What do you all think of this idea?"

Bob_sapp said: "[QUOTE=Beretta;66446] What do you all think of this idea?[/QUOTE] I think it sucks, but I'm no expert investment talkin' guy."

thezster said: "Your student loan will cost you 6% - guaranteed.... Can you find a mutual fund that will "guarantee" a 7% return?"

cwms said: "Let's say you find a fund that will quarantee 8%. That's a 2% gain, right? Wrong! You will have to pay taxes on that 8%. Now you are in the hole. Bad Idea!"

Heather said: "Hello and welcome to SuperiorInvestor! It's great to have you here. I have to agree with Bob Sapp and TheZster.. it's never a good idea to take on debt in order to invest. It might be better to put cash aside and invest that way instead."

Aligator said: "[QUOTE=Beretta;66446]........now that I'm 18 I feel it's my responsibility to handle my own money and start making my own investments........ [/QUOTE] Hi Matt. It's not really your responsibility at this stage. It think it [I]is[/I] your responsibility to learn what is being done and all the ramifications thereof. My experience indicates that accountants are not always good investors, though, so learn from good sources - and one may or may not be your dad. [QUOTE]........I have recieved several offers in the mail recently regarding student loans.............[/QUOTE] In the mail. Unsolicited. Just out of the blue they want to loan money to someone who has not yet had a chance to nail down a real job...........Wow. I am probably not the only one here who knows that this whole student loan industry is a racket."

cwms said: "So Matt, what are your thoughts about your plan?"

rmelv said: "Never invest in the stock market with borrowed money. Perhaps if you could find a bond yielding 10% that would be a little better, but you are best off investing money that is yours."

AlfredSokol said: "You really can't ignore the concept of losses because they happen each and every day in the stock market. If you take out a loan and lose all your money you will be repaying a loan for nothing! You would probably be despondent making those payments. It is never worth it."

Beretta said: "This is almost exactly what my dad told me, just thought I'd get another opinion. I figured that by the time I had to start paying the loan the fund would have already been close to equalling the amount I borrowed. After thinking about it I agree that it probably would not be in my best interest to invest with borrowed money, I guess I was thinking more about the reward than the risk. Like I said before I am a total newbie when it comes to this stuff. Does anyone have any good sites to learn more about the stock market and other investments? I know a bit about it from a college Econ class I took, but not enough to feel confident in making investments. The one company that I'm really interested in investing in is PLM (Polymet). It's a mining company north of here that is in the final stages of gaining rights and approval to extract gold and other precious metals from the soil in the Iron Range and I think some parts of Canada."

ratAphooey said: "Everyone thinks of borowing money to invest at one point or another."

pranith said: "I think this will not be working as for my knowledge is concerned. If you are going to take loan and invest money in mutual funds if every thing is fine then ok. If some thing gone wrong then you will be in trouble."

tomtat1 said: "[QUOTE=rmelv;66546]Never invest in the stock market with borrowed money. Perhaps if you could find a bond yielding 10% that would be a little better, but you are best off investing money that is yours.[/QUOTE] There are plenty of bonds out there yielding 10% the problem is they are not safe. I agree with everyone else here. Don't borrow money to invest at your age. Instead use this time to learn about investing, and gradually build positions with money you save. If you like individual stock picking set up a mock portfolio on any of the sites that do this and see how you do."