Relocating nearby to Munich

157 posts in this topic

8 hours ago, fraufruit said:

What if one put up a million in investments or savings as collateral?

German banks are allowed to do that. However, you have to reside in Germany. When I left Germany they even refused to renew my mortgage and I had to pay it back. Not even a mortgage broker could find a bank willing to lend to a non-resident, no matter how much collateral I offered.

 

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11 hours ago, murphaph said:

Nobody will lend normal people money to risk on the stock market. It's that magic word "leverage". It's accessible in a way that other investments simply aren't for mere mortals.

Banks do. It´s a double-edged sword though as I found out during the Lehman crisis when my bank called to let me know that they sold large parts of my portfolio at firesale prices, causing life-changing losses because the asset/loan ratio had deteriorated.

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Can I, as a normal person with no significant wealth, walk into a bank in Germany in 2021 (not 2006) and get a loan at 1% for 500k to buy shares with, without offering other collateral? (Like my already paid off house, which is in essence no different from a mortgage because the loan is secured on the property anyway)

 

 

 

 

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1 hour ago, murphaph said:

Can I, as a normal person with no significant wealth, walk into a bank in Germany in 2021 (not 2006) and get a loan at 1% for 500k to buy shares with, without offering other collateral? (Like my already paid off house, which is in essence no different from a mortgage because the loan is secured on the property anyway)

When I was still residing in Germany (2015) it was possible (not for 1% though). Don´t know about the situation in 2021.

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Unsecured loans for 500k for someone working a normal job are available even if the bank knows the money is to be used to buy shares on the stock market? I find it hard to believe. But I will stand corrected if someone finds a link to such a product.

 

 

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When you take out a personal loan, do you need to give a reason?

 

The bank only cares if you can keep up with the repayments.

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For the record, I was speaking theoretically about borrowing money to invest. 

 

Some people go into their margins like jeba did which is something I've never done and he is a living example of the reason why I don't.

 

For me, if you don't have money to invest, don't do it.

 

We should probably get back on topic. :)

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44 minutes ago, murphaph said:

Unsecured loans for 500k for someone working a normal job are available even if the bank knows the money is to be used to buy shares on the stock market? I find it hard to believe. But I will stand corrected if someone finds a link to such a product.

That´s a misunderstanding. I wasn´t talking about unsecured loans but loans using property as collateral. Basically, you can get leverage by buying leveraged products like closed end funds though. The risks are the same though (as I found affirmed last year when all of a sudden the price of oil turned negative).

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Ah ok, yeah then yeah it's a secured loan, no different than a mortgage, where you risk your house to invest/gamble on the markets. The bank doesn't care because they have a safe enough asset to repossess. My point was that you won't walk into a bank and get a loan for 500k without the bank having security whereas the bank will loan you 500k to buy a property with very little (or, depending on profession) no collateral of your own, as long as they have a lien on said property in case you default. It can still go spectacularly wrong etc. etc. but I was just pointing out that property investment/risk/losing one's shirt is accessible to ordinary people in a way that investing on the stockmarket isn't, because of leverage (lots of people have been burned by over leveraging of course).

 

For unsecured personal loans the banks may or may not have conditions as to what the money can be used for. In Ireland I'm pretty sure the contracts exclude uses such as gambling etc. but proving it is another matter and the bank essentially risks non-repayment of this typically much smaller amount and offsets the risk by charging significantly higher interest rates on these unsecured loans. In essence, the bank is gambling you will not default, which is a bit ironic.

 

Yeah FF, you're right, back on topic :-)

 

 

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17 hours ago, murphaph said:

The main advantage with investing in property is that a bank will actually lend you the money to do it. Nobody will lend normal people money to risk on the stock market. It's that magic word "leverage". It's accessible in a way that other investments simply aren't for mere mortals.

 

I wish I was a stock market whizz kid who could spot the next Apple or Amazon and just pile my money into those but I'm not. It would be a pure gamble, so I invest a very small sum on a boring ETF that will never set the world on fire.

 

I do know a bit about property. I can fix stuff when it breaks. I never paid rent in my life but it's not for everyone.

 

If you have real good knowledge of the market you do not need a lot of capital to make money.    For that they invented the CDFs.   A CDF is another way of investing in shares without buying the real shares, you enter in a contract with the CDF provider in which you "buy" the share from them and you can later on sell them to them again, so you use the market prices as a baseline.   But the real magic is that they offer you what they call "leverage", which is a multiplier of your investment, and it amplifies the gains or loses of the shares you "bought".   So you can invest 1000 EUR and you can use a 20x leverage and if the share goes up you make the gains of 20K in shares.  if it goes down you lose 20x.

 

Combined with the apps and the "zero commission" trading, investing became more like a game.   But reality is that CDFs are extremely dangerous, about 70% of the retail investors in CDF lose money because they are all trying to get rich soon, and for that you will have to compete with the big players who basically are allowed to legally cheat.

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2 hours ago, murphaph said:

Unsecured loans for 500k for someone working a normal job are available even if the bank knows the money is to be used to buy shares on the stock market? I find it hard to believe. But I will stand corrected if someone finds a link to such a product.

 

OK, not 500 but limited at 100K. But you can do what you want with this 100K.

And pay off in up to 10 yrs.

Try Verivox.de

 

They show the SWK Bank (who ??)  offering 100K to employees (not self employed) for around 5%

Hardly a bargain - but those who can make 30% on the market will be on a roll

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I reckon if you can reliably make 30% on the stock market you wouldn't need to borrow anything, just keep reinvesting your 130% and it won't take long at all before you're filthy rich even if you started with a few month's savings. I guess the reality is that very, very few people can consistently make 30% on the stock market or even consistently make a profit. I reckon such people do exist, but are vanishingly rare and I certainly don't count myself among them.

 

The rest of us can throw a dart at the board or alternatively invest in something that we can be a part of and steer, rather than just being a passenger. With property investment you can buy somewhere you think has a reasonable chance of increasing in value. You can make changes to the property using your own labour to add value. You can become better at selecting tenants. Of course you can have problem tenants and property can lose value, but I believe if you do not need to sell then it's still a good way to be comfortable in retirement.

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Or you can spread your investment in 10 or 15 shares in different segments and choose only "Dividend Aristocrats", throw in a couple of safe ETFs, and one or two risky shares or cryptos and you will have a solid portfolio.   You will be doing very close to the average without much knowledge and with very low risk.

 

What you described is really a complicated thing, the get-rich-fast attitude is what make people lose money.  And most retail investors lose money.

 

Nowadays there is plenty of "social networking" investment.  You can see how other investors do and you can even copy their investments, so you sit down and let them do the job for you.   But you can see as well that those who made crazy returns can't sustain it.  People make the mistake of copying those guys and they do excellent for three, four months and then they crash bad, like really bad.

 

The minimum investment to open an account in something like eToro is US $500.  And you can learn a lot from that, there is plenty of information and you can see what other people do.  Even if you lose everything, which should not happen, it is a bargain for what you can learn.

 

 

P.S., Of course I know almost nothing about the financial market, my investment is only what I can afford to lose, at least until I know better.  But the formula I described seems to be solid.

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Yeah I have a couple of ETF savings plans but that's where my engagement with the stock market ends I would definitely advise people to use such products rather than have their savings effectively devalue in a savings account, assuming the money is not required in the short to medium term. The only individual shares I have ever owned were ones given to me by employers.

 

The other thing about property that is really important to me is that I can leave it to my son. I can make a return/pension from it until I die and I can leave something behind for him. That's perhaps a very Irish mentality I don't know, but "leaving a bit of land" seems to be part of our cultural DNA.

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Just heard on the radio that Property prices have increased this year by bout 10%

 

Not bad...   

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5 minutes ago, SpiderPig said:

Just heard on the radio that Property prices have increased this year by bout 10%

 

Not bad...   

In a few years the question of buy/rent will have sorted itself out.

 

If you haven't already bought and are not very well off, you'll be renting.

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34 minutes ago, cb6dba said:

 

If you haven't already bought and are not very well off, you'll be renting.

 

The haves and the have nots can always take their grievances to the ballot box.

 

Political unrest in most cities.

 

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