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?

Yeah I'll probably use savings and sell some ETF units.

Yes I know the costs involved, however the first consultation is for free.

Well yes op you made a very dumb mistake, and keep on making them .

I would liquidate my assets, pay off the debt. Start saving, some good interest rates around at the moment. Then only invest your own money, and only invest what you're willing to lose .

Agree I messed up, however I'm not continuing to make same the mistake.

I have a plan now, so I'm heading in the right direction now. At least I owned up to my mistake.

Your savings are sat at 1.25% and your loan is 4% + your protection plan . Madness .

If you want to keep your investment and take the chance in it going up or down at least put your savings in a higher interest account.

Seems your borrowing £40000 will cost you @ £50000 once you have paid interest and protection plan.

Highly unlikely you will ever break even.

I'm going to pay off the loan tomorrow. The leftover savings will be transferred to a high yield savings account.

I will keep building my savings and invest in ETF. Sounds like a good plan to me, don't you think?

It depends on your faith in the stock market. You're currently getting growth of 11% are you confident this will continue. Will you be ok if one day the market crashed and it goes down in value?

Your savings are definitely not working for you so need to be in an account with a higher interest than your loan.

As you have 2 financial advisors lined up ready to help maybe take their advice rather then some random person on mn .

If you look at the history of the S&P 500, you'll find the trend is up. Sure there'll be negative years, it's normal and healthy.

If my investment horizon is 25 years, why should I care if the market goes up or down?

Well as you're so confident in the market, why are you even asking if you should cash it in to pay the loan.

I'm looking for suggestions/opinions.

I don't worry about the market cos I ain't emotional. I will continue to invest just won't use the banks money. I'll start from scratch with my own cash.

I’m glad you’ve decided to draw a line under your mistake, pay off the loan, start again with a balance of savings (no risk to capital, eg bonds and high interest cash ISAs) and the ETF (capital at risk).

May I say you sound quite immature when you say that ‘worrying about the stock market’ is being emotional. Be realistic and sceptical. Basically investing in equities means accepting that you could lose your entire capital. A well-managed fund reduces this risk hugely but you are not guaranteed a return either in the form of dividends or growth in the value of shares. In addition, if you need to liquidate your holding (because of illness, say) the timing may not be good as the market at that point might be in a dip. So even with a 25 year timescale, a 100% equity investment is undesirable.

Do you have a pension? Property?

I understand the markets, I've lived through the GFC and all the negative years that I can remember. That's why I don't get emotional or scared of losing money. The market always rebounds. And if I'm in it for the long haul why should I care if the market drops today or next week etc? All I care is what happens when I retire.

I have a pension, no property.

Op what happens if the market slumps when you retire ?

I’m not sure you do understand the markets OP. If you really understood the first thing about money you wouldn’t have borrowed to day trade, kept your savings in a low interest account and failed to invest in property. You would also understand about risk and timing.

Nonetheless, I wish you luck with your revised strategy 😊

I don't have to touch the capital, dividends will fund my lifestyle, plus pension from 2 countries. I think I'll be just fine.

It was lazyness, not lack of understanding. Most professional day traders lose money, only few make it.

I'll fix it.

I sympathise OP. Day trading is extremely addictive and it's only when you expose yourself to the market do you realise how emotionally and cognitively demanding it is and it's very easy to quicly dig yourself a hole. I wouldn't repay the loan yet, I would look for the highest risk free interest for the savings and use that to offset the interest on the loan and keep the Vanguard fund or possibly even a FTSE fund with a decent yield.

Yeah I lost control, I stopped it before I lost everything, now I'm trying to fix it. I'll definitely transfer the cash savings to a high yield account.

I've invested in the Vanguard FTSE All World ETF, which has a decent return including divs.

Do most ‘professional’ day traders take out personal loans to trade though? And losing control smacks of being emotional, not professional…

Your attitude reminds me so much of my XH,,who worked in the city, hung out with other traders but in the end just didn’t get even the basics. It’s taken me a lifetime to dig myself out from the pile of shit he got me into. I hope that doesn’t happen to you.

It doesn't matter what products were used, personal loan, margin loan or derivatives, a loss is a loss. And most traders lose more than they win. Putting a stop to it before it spirals out of control shows character. I didn't lose everything, I still have time to fix it.

Ok then OP, ive said my piece. Best of luck from now on.

Op - I can highly recommend the book 'The Psychology of Money' by Morgan Housel.

Wasn't one of the reasons for the crash that led to the 1930s depression because banks then were willing to lend money for people to invest in the stock market 'on margin' seemingly as no one could lose. And this just built a bubble that burst leading to many people losing all their money and then being in terrible debt as they had borrowed money to buy stocks that became worthless?

May be something for the OP to bear in mind as to why this was not a good idea

When a bank has a customer for life, they'll sell you everything. I was given a loan without any questions because they know I'll be with them for lifetime.

As you can see I've changed course and didn't lose everything. I've acknowledged my wrongdoing. I'll bounce back from this setback, this experience will only make me stronger. It won't deter me from investing again.

It's been a good April fools . Back to work now . All the best op.

Op - can you afford the monthly loan payments? I'm surprised no one has asked.

I think sell the ETF while it is doing well. Pay off the loan. Then start putting £400 per month that would have been a loan payment into the same ETF in an ISA and build your investment up again that way.

And don't be surprised if IFAs aren't interested in talking to you - they normally only take on clients with around £1million to invest.