Let's say you were in the following position
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Now, a lender offers you a loan of €200k @1% over 15 years.
If I were offered a loan at 1%, I would take it and buy shares.
There is an element of risk. The stock market could go into a long term decline and I might lose money.
But over the next 15 years, it is very likely that the return on the stock market will be more than 2%.
There will be stock market falls and corrections, but they don't worry you. You have experience of them and you will not be forced to sell.
And although I have no plans to trade up, plans change.
And there is the small kicker that they might do a deal. Even more unlikely now, but it's a kicker.
Brendan
Well, there certainly have been 15-year periods in the past where equities in general would not have produced a total return of more than 2% per annum, on average, after commissions, fees and taxes are taken into account - the last 15 years would be one such example.
You should ignore inflation. You should compare the nominal return with the nominal interest rate paid.And that's before taking inflation into account...
I'm continuing my plan of buying monthly until I reach a 30/70 % split of cash and equities
That does not make any sense. I suspect you have fallen victim to the "euro cost averaging" fallacy.
If you think that you should have 70% of something in the stock market, then do it now. If you think that the stock market is overvalued, then you should not invest anything in it.
I agree it doesn't make any financial sense , I'm new to investing in the stock market so was dipping my toe at the start I'm less than a year into it and was nervous about just putting a big lump in every year , I find it hard to alter my mind set on this , hopefully I can, thanks .
"after commissions" ? Commissions on buying and selling shares would be 2%. They have almost negligible impact on someone who buys and holds a diverse portfolio of shares.
"fees"? There are no fees if he buys shares directly as I am suggesting.
"taxes"? Yes, as I have pointed out taxes will reduce the return. While dividends will be taxed, if there is no capital gain, there will be no CGT.
...I only work limited hours so pay very little if any tax.
.... ill keep going till the 8 year deemed disposal and rethink the strategy then , paying the government 40% tax will hurt a lot but meh 8 years is a long time lots can/will change.
I have just seen this now.
If you are paying very little tax, you should be investing directly in shares and not in funds as there will be little tax to pay on the dividend income - presumably 20% vs. 40%.
When you hit 40% tax,you should be looking at pensions if you still have pensionable income.
Brendan
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