Borrowed money from the bank to Invest in stocks

[Jitster]

Ok, I made a dumb mistake by borrowing money from the bank to Invest in indivudual stocks. I borrowed £40K at 4% interest rate. Now I'm left with 19K! And a debt of £32K. The 19K is now fully invested in Vanguard All world ETF. I also have £21K in savings.
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Should I pay this debt by selling the ETF and using savings? Or should I keep on paying the monthly loan repayment amount of £477 for another 6 years?

wtf were you thinking. Is this something people do?!

@Jitster were you experienced in trading? Who advised you that this would be a good idea?

Yes that's exactly what happened, stupid I know! The ETF is an ISA.

Day trading- pretty much the quickest way to lose money that isn’t a fixed odd betting terminal. Sorry, op. What a mistake. Day trading is not “investing” either- the clue is in the name. What did you tell the bank the money was for- no way in a million years they would have lent it to you for that.

In your shoes I’d pay the debt and start with a clean slate. I don’t think you’re the right person at the right time for any sort of clever plan to grow your way out of debt.

Well I used to live in Sydney and day traded Aussie stocks, which worked for me at the time, because I didn't day trade risky stocks. However it all gone Pete Tong once I started day trading US stocks.

Do you typically have trouble with gambling? Dabbling in risky stocks is stupid, if you don't have a lot of capital. Taking out loans to dabble in risky stocks is insanity.

Yes I know it was a stupid thing to do, however the loan duration is 10 years, I've got another 6 years to pay. I don't day trade anymore, I put everything into ETF which is diversified across various sectors.

Wouldn't it make sense to grow the ETF rather than start from scratch.

The money was a personal loan, they didn't ask what's it for.

No I don't have gambling issues, I just made bad stock choices. I've learnt my lesson now, hence why I only invest ETF.

I still stand by this.

You sound quite relaxed and laissez faire about the whole thing - I think you should pay off the loan, and follow a more recognised path to financial stability.

Call it stupidity, didn't think at the time, learnt the hard way. However, thank almighty I didn't lose all the cash, I can recoup the loss through ETF gains over time.

But if the ETF is gaining 11% on average annually, doesn't it make sense to grow the ETF? The loan will end in 2030.

You did something incredibly daft and lost a lot of money. You’re now assuming an ETF will gain 11% a year based on nothing at all. You say you lost the money because “bad stock choices” when almost all day traders lose money. You borrowed from the bank to do this. You don’t know the difference between trading and investing.

Your perception of risk is way off. You would do better to step away. Don’t chase your losses.

(Full disclosure- I’m an investor with a high tolerance for risk. But what you’ve done is absolutely crackers and I think you’re not temperamentally suited to this stuff.)

I really don't know - investments can go down as well as up, and this whole thing already seems to have started on the basis of a risky decision.

I wouldn't be able to sleep at night, so I'd want to get out, and to draw a line under the whole thing.

The money was a personal loan, they didn't ask what's it for

What bank was that? Banks aren't allowed to lend you that much money without asking what it's for.

I think @MugLove speaks sense.

Yeah keep it in vanguard - you’ll make much more than 4% your money is working harder there

The ETF is long term, I DCA into the fund every month, over time the fund increases in value via compound interest. It's not going to return 11% every year but on average it will.

My investment time frame is 25 years plus, sure the markets will go up and down, but overall the market appreciates in value, just look at the history of S&P 500.

It's invested in Vanguard All world ETF.

Keep the money in the etf until stops earning more than your bank rate of 4% plus fees.

Either try and get the interest rate of your £21k above 4% or use that to pay down your loan? Therefore at least you are beating the bank.

Lesson learned. There are plenty who have done worse.

Yeah I'm growing the ETF, it's doing quite well at the moment. I also DCA every month, it's growing steadily.

I've definitely learnt my lesson for sure!

It’s not interest, compound or otherwise. And it’s not a guaranteed average rate of 11%.

Please go and learn about this stuff before you screw up again. I’m not saying this to be unkind, quite the reverse.

I can't believe you've got 21k sitting earning interest at a paltry 1.25%, with a loan at 4%. What the hell kind of invester does that? You say you've learnt your lesson, then why haven't you at least put it in a higher interest rate account? Over the past year I've locked in parcels of savings for periods of 1 Yr, 2 Yr and 18m, at rates varying from 5.8 to 6.2%. You can't still get that now, but investec still has an easy access account at over 4%. You're mad.

I'm neither a gambler nor an investor myself but can someone explain how what the OP has done isn't gambling?

The ETF is long term, I DCA into the fund every month, over time the fund increases in value via compound interest. It's not going to return 11% every year but on average it will.

What makes you think it will average 11% per annum? Where is the interest coming from?