I'm thinking of taking a cash advance on my credit card to invest in stocks. Should I buy now?
Roger asked:
Things are going great in the market, every day up, up, up! And all that stimulus money from Obama.
8 Responses to “I'm thinking of taking a cash advance on my credit card to invest in stocks. Should I buy now?”
That would be the ultimate of dumb. It could all tank tomorrow.
Just ask AIG. They pretty much did what you're thinking….thinking that it HAS to go up!
Never… ever… take a loan, cash advance or anything remotly near it to buy stocks.
What's worse…. taking a loan to buy stocks when you have little to no experiance investing or trading.
This is just about the worst thing you can do!
You already have your answer; but just to reinforce it, NO!!!!!!
A fool and his money are soon parted, as they say. This rally is what they sometimes call a "fool's rally" and it happens a lot of times in a market like we have now. It only looks "great" for a while.
Wait a little while and you will see what I mean. And, never borrow money to invest in the stock market.
You have to examine the level of risk you are taking and see if you are comfortable with it.
First of all, investing right now is risky no matter what the company. Even if it is a good company, there is a risk that it could stall or collapse. The stimulus might not work. North Korea could start a war with their satellite launch. Many bad things could happen.
Secondly, you are paying the highest rate of interest legally possible. That means that you have to make a stupendous return on your investment simply to break even. That is not likely to happen.
Third, if the investment does do good and you do make money, the government won't care that you paid most of it to the credit card company and is going to make you pay taxes on everything you made.
So to summarize, the only way you are going to make money is by making over a 30% return on your investment. If the investment does increase in value it will increase your taxes owed to the government regardless of what you are charged in interest by the CC company. You can wind up making a 32 percent profit and still losing money.
If the investment loses money, you will still have to pay 30% interest and absorb the money you lost.
Either way it is a bad deal.
Do not take a cash advance on your credit card to invest in stocks. The risks are huge. The rewards are nowhere near as good as you seem to think they are.
It's not up, up, up. It's more like up a little, down a lot, down a lot, up a little. Do not try to time the market.
Instead try to save a little each month ($50?) and invest it in a no-load mutual fund like those in the Vanguard family ot the T. Rowe Price family.
Be patient. Invest in high quality companies.
No…unless it is a free advance with no interest.
DOW dropped today. And you're borrowing with no 100% certainty that you will be able to pay back with a profit??? And you must pay a high interest on a cash advance!