Why banks won’t loan for stocks?
I invest pretty much all my savings in the stock market (1M+ currently invested in Vanguard index funds) but... why is that banks make it incredibly easy for people to borrow cheap money for houses or businesses, whereas if I went to Bank of America asking them for a loan to invest into Bank of America stocks they’d laugh in my face? Doesn’t investing in the stock market have a collateral just as good as a house? So why would a bank forfeit such opportunity? Don’t they themselves believe in their own stock? Also, keep in mind this is a thought exercise: I wouldn’t actually leverage myself into a 7 figure stock market position, it just makes me wonder if the stock market is actually a good investment vehicle as everyone else preaches.
It sounds like you have an excellent idea for a startup. You can put your $1m+ into an even better investment.
Mmm it’s more like “should I pull my 1M+ out of the market and put it into real estate since even banks consider it a better investment than their own stock?”
If you take 1mm and use a portion of it as leverage you could technically get a loan for 1mm while the bank rides most of it. You take the profit when you sell as long as you keep putting the profit into real estate so you don’t get taxed. It’s a game you won’t win until you die but people have become millionaires with it. Research it though as I’m not the best resource since I’m still working my way towards getting that leverage :D.
If this isn’t a humblebrag I don’t know what is
You can do that for crypto. Heard about salt lending ?
what interest rate can you pay for it?
Starts at 5.9%
That's too low for personal loan I guess
Nope. That’s the “standard” SOFI rate for 5yr unsecured loans.
No. Investing in the stock market does NOT have a collateral as good as mortgages. You must either be young, or oblivious of market movements of the last 20 years.
Wait, didn’t average houses drop 40%+ in 2009? That seems to me aligned with the worst drawdown stocks can usually have (40-50%)
Actually, no. Case-Shiller National dropped by 10% while the stock market (S&P specifically) dropped by 45%. In 2000, the Nasdaq drop by 60% and took 10 years to break even. The associated risk would make this product quite costly.
Because the federal government heavily subsidizes the housing market and the GSEs own half or more of the mortgage market. It's an artificial market that's why rates are lower.
This. Jumbo loans is when govt doesn't assume risk anymore. So around the first 400k is artificially backed by govt.
It's definitely possible to get a loan that's backed by securities, but usually the terms aren't that attractive. The big issue with those is that the value of the securities can change quickly (eg. if you had a loan backed by Enron stock) and the loan can't be repackaged and sold to other entities.
Don't bank with BoA.
Isn’t this what a margin account is for?
But that’s completely different and much more expensive. It doesn’t have nearly any guarantees as getting a mortgage. In case of downturn, the broker issuing your margin will likely call you on that! In case of a mortgage, just keep paying and the bank will happily leave you alone even if your house drops in value.
Margin call yikes not even close to a loan!!! Never trade on margin unless you know what you’re doing.