I took a 10yr loan to buy TSLA shares [Austria]

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herbert_21
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I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Hi,

I am 39, an IT guy, unmarried. I own a house which is 50% paid. My job is nice. I love my girl.
I sold my 3-room flat in a city and bought a house in the suburb. This was the first time I had money on my bank account.

I made a 50% down payment. I kept only 30k.
My interest rate is now at 0.5% (Europe, thank you, Draghi) and I learned that paying back early does not make sense. My rate is now €700, which currently is $830, plus $200. So I started investing with ETFs.

Now let's come to the topic. My house is not on my land. I pay about $200 a month for it. Forever. But the loan was much less because of this.
So I decided, if I can make debt for my house, I want to own something when I stop working. Bcs the house will be where I live, but it will be something I have to pay for (a liablility) and not sth I own, like Kyosaki says.

So I took a 10yr loan to buy some TSLA shares. I haven't made a lot of money, but I believe I will. I own 75 shares. I still want to buy more.

Today, Tesla was included in the S&P 500. Tesla is more than 25% of my portfolio. Another 30% is in AMZN and AAPL. Portfolio is about 70k, debt for investing is 20k, house is 150k, down payment was 150k. I think that growth stock will continue to outperform, and even as we see some recovery, this will continue bcs of low interest rates, low inflation rate and high deficit spending of FED and ECB.

Am I speculating or investing? To be continued.
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Re: I took a 10yr loan to buy TSLA shares

Post by LadyGeek »

Welcome! Based on the use of Euros (€) and mention of Europe, I moved your post to the Non-US Investing forum. What is your home country?

Is TSLA your only investment? Please post your portfolio in this thread using the My portfolio: seeking advice format. It will make you think about the "big picture" while giving us the information we need to point you in the right direction.

If you have any questions, ask them here.
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Re: I took a 10yr loan to buy TSLA shares

Post by Valuethinker »

herbert_21 wrote: Tue Nov 17, 2020 10:53 am Hi,

I am 39, an IT guy, unmarried. I own a house which is 50% paid. My job is nice. I love my girl.
I sold my 3-room flat in a city and bought a house in the suburb. This was the first time I had money on my bank account.

I made a 50% down payment. I kept only 30k.
My interest rate is now at 0.5% (Europe, thank you, Draghi) and I learned that paying back early does not make sense. My rate is now €700, which currently is $830, plus $200. So I started investing with ETFs.

Now let's come to the topic. My house is not on my land. I pay about $200 a month for it. Forever. But the loan was much less because of this.
So I decided, if I can make debt for my house, I want to own something when I stop working. Bcs the house will be where I live, but it will be something I have to pay for (a liablility) and not sth I own, like Kyosaki says.

So I took a 10yr loan to buy some TSLA shares. I haven't made a lot of money, but I believe I will. I own 75 shares. I still want to buy more.

Today, Tesla was included in the S&P 500. Tesla is more than 25% of my portfolio. Another 30% is in AMZN and AAPL. Portfolio is about 70k, debt for investing is 20k, house is 150k, down payment was 150k. I think that growth stock will continue to outperform, and even as we see some recovery, this will continue bcs of low interest rates, low inflation rate and high deficit spending of FED and ECB.

Am I speculating or investing? To be continued.
You are, simply, speculating.

I was in my late-ish 30s and rich from employer stock in the dot com era. I think my net worth went down around 90% in the next 2 years.

I would definitely not buy more Tesla shares.

I would definitely not pay any attention to Robert Kiyosaki. The man has never done many of the things he claims he has done. Has made all of his money from doing financial "advice" - selling books and products to his readers.

I can't really sort out what your balance is from how you describe it, so this is the view from the drone (UAV) flying over head.
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares

Post by herbert_21 »

Hi,

I am from Austria, and apart from my house which cost me 300k of which I payed 150k, those are my only holdings:

MSFT, AAPL,AMZN: 30k
TSLA: 28k currently 75 shares, planning to aquire another 25 shares.
Both AMZN and TSLA are more than 25 percent
Other stocks and ETFs: 12k

Loans / Debt
150k 20yr mortage in house. €700 /month. Rate is 0.5% (€688)
15k 10yr loan for TSLA shares. Rate is 4.375% (€155,09)
5k loan with 3,90% and 30m (€210/month)

International Lifestyle: Plan is to stay in Austria
Currency: Euro

Pension and insurances
I will receive some pension from the state. House and major insurances I have, but no BU. House loan is not insured.

Cash
I dont have an emergency fund. I can always take out a Lombard loan against my shares.

My goals and investment style
Repay 5k loan first. Keep other loans, and invest until portfolio is 100k. Once this is complete, diversify into ETFs, dividend growth stocks. But stay 100 percent in equity. Pay back loan with high interest rate = future risk free asset

This is how it is supposed to end up in 2030
- A portfolio with 200k in risky assets
- A house worth whatever, but with less than 70k debt left. I bought the house with furniture for 300k.
- My car is used, but payed off
- No consumer debt

Questions
I feel I lost some years of investing in my 20s. Is using debt for investing reasonable?
However, this isn't really true, when I lived in the city, I paid back some debt. I lived a rather frugal life style. When I sold my flat, it was worth double of what I paid. That's a 7% return on 11yrs.

I will update this thread.
Last edited by herbert_21 on Wed Nov 18, 2020 4:37 am, edited 1 time in total.
sd323232
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Re: I took a 10yr loan to buy TSLA shares

Post by sd323232 »

well you know what to do when you hear people borrowing money to invest. overconfidence is here.
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Re: I took a 10yr loan to buy TSLA shares

Post by nisiprius »

herbert_21, why do you care whether fellow Bogleheads label it "speculating" or "investing"--unless you are trying to kid yourself about the amount of risk you are taking?

You are taking a lot of risk. Do what you want to do, but do not kid yourself that it is not a high risk just because you have high conviction in Tesla.

One of the characteristics of risk is that return doesn't erase risk. Even if there is a high expected return, it does not mean that the risk goes away.

State lotteries pay out roughly half of the money they take in, so of course they are not a good gamble. But suppose. you find a lottery agent who says, believably, "if you buy your lottery ticket here and it wins, we will triple your winnings." (In real life this wouldn't be believable, but this is just a thought experiment. Triple the jackpot and a lottery ticketbecomes a good gamble, because the expected return is now positive. Nevertheless, it is still a gamble, and the most likely outcome is still that you lose the money you paid for the ticket.
Last edited by nisiprius on Tue Nov 17, 2020 1:28 pm, edited 1 time in total.
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Re: I took a 10yr loan to buy TSLA shares

Post by ohboy! »

I can never tell if these threads are trolling or not. Speculation and leverage. The more of this I see the more I think it’s some sort of top. If govt sends out more trucks of money maybe we can pump it further. OP, have you seen wallstreetbets? You can speed up your gamble with options.
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Re: I took a 10yr loan to buy TSLA shares

Post by nisiprius »

P.S. herbert_21, Tesla stock has been available for more than ten years--and I personally have owned a tiny, tiny amount of it as one of the holdings of the Vanguard Total Stock Market Index Fund for about that long. The most serious question I have for you is why on earth did you wait until 2020 to buy it? The company's general characteristics and Elon Musk's personality have been on display for a long time. If you have faith in the company now, why didn't you have faith in it five years ago? The fact that you are investing now, rather than five years ago, certainly suggests that you are primarily influenced by recent stock performance, and considerations of the company's fundamentals, or the intangibles surrounding company management are just being used to rationalize a decision made on the basis of performance.

My ownership of Tesla stock is based on my fundamental beliefs and pretty consistent strategy--"own the whole market and hold it 'forever.'" On what fundamental beliefs and strategy is your ownership of Tesla stock based on?
Last edited by nisiprius on Tue Nov 17, 2020 1:29 pm, edited 2 times in total.
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Re: I took a 10yr loan to buy TSLA shares

Post by alex_686 »

Valuethinker wrote: Tue Nov 17, 2020 12:52 pm I was in my late-ish 30s and rich from employer stock in the dot com era. I think my net worth went down around 90% in the next 2 years.
I was on the margin desk during this time. Boy, did I have a fun time liquidating accounts.
Valuethinker wrote: Tue Nov 17, 2020 12:52 pm You are, simply, speculating.
I would be a little bit kinder, classifying this as a very aggressive investment. I am modestly in favor of leverage. As leverage go I think what you are doing, a home loan, is one of the better choices. On average the stock market should return more than the interest rates. I do question you choice of investment.

You have chosen a hot sexed-up company. So not just lots of specific risk, but a highly volatile one at this. So let us break this down.

What is your market expectations - both of return and risk - for TSLA? What are you basing this on? Have you read the financials or just putting down money on a company that has lots of buzz? Have you set up specific triggers or gates? What if TSLA goes up for down by 50%? Ride the wave or cut your losses? TSLA long term prospects are going to be very different in 5 years than today. What are you going to do then?
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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wander
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Re: I took a 10yr loan to buy TSLA shares

Post by wander »

Op, I used to be like you. But I stopped when I lost $18k to a single company (that company went bankrupt so the stock price was from $300 to $0.XX a share. Now, I own thousands of companies.
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Re: I took a 10yr loan to buy TSLA shares

Post by supalong52 »

I also invested through the dot com boom and bust. Fortunately I was only a college student at the time so my gains and losses were limited to the four figure range. I bounced back as soon as I started working after college. An easy pill to swallow. I hope you either strike it big or learn your lesson fast.
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Re: I took a 10yr loan to buy TSLA shares

Post by herbert_21 »

So, yes, I do have high conviction. I rather discuss the Tesla bull thesis in the appropriate thread. But, I wouldn't say it's too late.

Let me answer your questions

Why didn't I invest into TSLA earlier?

I paid for a flat. I had no money for imvesting. In 2008, when flats where cheap I bought a 3 room flat for 108k. I used my own 65k and my.sister.borrowed me the money. I tried to repay as quickly as I could. In never even looked on the house prices. I did not look at interest rates. I had a personal obligation. I avoided debt by all means.
When I took out my house loan, I thought OMG. What is going on here. The bank would.literally give me all the money at under Inflation rate.
End of 2018, I sold my flat for 235k. This is the answer why I did not invest in Alphabet earlier. I did not know about TSLA.

What is your expected return
About 10-20% plus x. I believe the current value of Tesla is somewhere between $600 and $720. Short term and options are risky. Long term investing is less risky but still risky. Individual companies is market risk plus individual stock risk, and I'm aware.
I want to have a place to document my journey. I do think this forum is the right place.

So, TSLA is a high risk / high reward investment. You can call it a bet. I would disagree. When Ron Barron invested in Tesla, was this very risky? Yes. Was he speculating? No.

From a value investor standpoint, you are taking a higher risk, because the stock price went up so much. I'd beg to differ. This company is in it's early innings.

Why am I writing this and am I a troll?
Well, basically I want to discuss people on a certain level. And by level I don't mean r/wallstreetbets. I need some place to reflect. I am willing to see some criticism and different opinions.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by LadyGeek »

herbert_21 wrote: Tue Nov 17, 2020 12:58 pm I am from Austria, and apart from my house which cost me 300k of which I payed 150k, those are my only holdings:
I have retitled this thread to clarify your home country.
herbert_21 wrote: Tue Nov 17, 2020 2:34 pm Why am I writing this and am I a troll?
Well, basically I want to discuss people on a certain level. And by level I don't mean r/wallstreetbets. I need some place to reflect. I am willing to see some criticism and different opinions.
Criticism and different opinions are welcome here.

My opinion: Investing in a single (or very few) stocks is not the approach we follow. Here is the investing philosophy we support for EU investors: EU investing
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by hightower »

I have a small stake in Tesla as well, but I won't be buying anymore. It's less than 10% of my entire portfolio and I'm mostly invested in broad market index funds outside this. BUT, I paid for it with cash from my job. I would never go into debt just to place a bet on a single company. That's incredibly risky, especially if you get too comfortable with doing it and get in over your head. The debt could pile up to an unmanageable level and all of your bets could be failures. Yes, Tesla is an exciting company and I feel strongly about it, but there is ZERO guarantee they will succeed and grow beyond what they are now. You have to fully recognize and appreciate that as a real possibility.
You could come out just fine or even better than fine, but you could also come out losing money on your investment and still being strapped with the debt. If you're 100% ok with this and understand it, then there's nothing more to discuss. Call it whatever you want (speculation, investing, etc), but make sure you understand precisely what you're doing and what the risks are.
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Thanks hightower, appreciate it.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Commentators:
Please post: how old are you?
What was the biggest loss in investing?
What would you do differently locking backwards?
What does "risk" mean for you, and what would you call a big risk?


This will help a lot. Short answers are okay. This helps me to understand from what perspective you are arguing.

Example: investing 3mn at 70yr age in one company is probably stupid.
If you are 20 and have $1500 to invest, and invest it all in one company, that's a 100% loss. But you "probably" will get over such a mistake three times in your life.
If you are 40 and run a company, there probably is no other way than invest in your own company.
You get the idea.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by LadyGeek »

May I offer a different perspective? You are asking for generalized opinions from investors who are not in your situation. What is appropriate for one person is not appropriate for another.

Making a decision based on a few answers from an anonymous internet forum can have a strong negative impact on your future investments.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by whodidntante »

It's only 15k, so it doesn't really matter what you do. A total loss wouldn't hurt that badly, and a five bagger wouldn't change your life. Although I do question why you pay such a high interest rate when cheaper options exist.

Make it 500k and I'll have a different conviction.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by 4nursebee »

herbert_21 wrote: Tue Nov 17, 2020 3:20 pm Commentators:
Please post: how old are you?
What was the biggest loss in investing?
What would you do differently locking backwards?
What does "risk" mean for you, and what would you call a big risk?


This will help a lot. Short answers are okay. This helps me to understand from what perspective you are arguing.

Example: investing 3mn at 70yr age in one company is probably stupid.
If you are 20 and have $1500 to invest, and invest it all in one company, that's a 100% loss. But you "probably" will get over such a mistake three times in your life.
If you are 40 and run a company, there probably is no other way than invest in your own company.
You get the idea.

Herbert I think you are thinking too small, too short term.
Start at the end game and work backwards. What is the end game goal and how to best achieve that?
One can't plan on a defined portfolio amount in the future. One can control daily actions to TRY and achieve a goal. Do those things.

I don't like answering personal questions online so no age.
I have lost millions investing. One year my trading records were an inch thick.
Do differently? I lacked the perspective to do so, but I owned NFLX and APPL many years ago. Could and should have held. Missing out on those things and seeing their growth happen/occur made me who I am today.
Risk for me is very different than mentioned here. Many here that are most conservative are risk averse likely due to their age.
Risk of ruin no longer concerns me.
I had some concern regarding portfolio risk in retirement but built up an excessive cushion that we can handle whatever happens for the rest of our lives.

I think taking a loan to invest in TSLA is foolish. No margin, no credit cards, no HELOCs, no bank loans.
A wise man said we all get what we want out of the market. What is it that motivated you to do what you did and then come here baiting the BH?
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by oken »

Dear OP.

What if you're wrong?
Will it ruin you?
How many years of your financial plan will it set you back? Do you have a plan on when to exit and what to do if your conviction falls flat?

Or are you just counting on it not falling flat?
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by KlangFool »

OP,


A) I worked in the IT/Telecom Industry for 10+ years before I gambled on Telecom stocks. I lost 50% of my portfolio in "Telecom Bust".


B) My family member worked on Wall Street. He was paid 7 figures in annual salary and bonus. He lost 10 million in "Telecom Bust".


Nobody knows nothing.


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herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

whodidntante wrote: Tue Nov 17, 2020 3:43 pm It's only 15k, so it doesn't really matter what you do. A total loss wouldn't hurt that badly, and a five bagger wouldn't change your life. Although I do question why you pay such a high interest rate when cheaper options exist.

Make it 500k and I'll have a different conviction.
So go to my bank and take a loan against my house, because interest rate is cheaper?
No, that's not a serious question from my end. 500k? Well, this could be my ruin. And 15k not. I agree 100%.
A total loss wouldn't hurt that badly
This is like I see it:

Long term, think 5-10 years I believe Tesla shares will be much higher. So I'm basically using 10k from my own money and 15k from the bank.
This is risky, but
- safer than options
- safer than using margin account
- safer than P2P investing, which I stopped
Although I do question why you pay such a high interest rate when cheaper options exist.
I am still figuring out how to optimize this. The interest rate for margin with my broker is 4.9% which is ridiculously high.
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

oken wrote: Tue Nov 17, 2020 5:50 pm Dear OP.

What if you're wrong?
Will it ruin you?
How many years of your financial plan will it set you back? Do you have a plan on when to exit and what to do if your conviction falls flat?

Or are you just counting on it not falling flat?
No, 15k won't ruin me. To loose 15k, my TSLA shares need to go down 66% from today. I would not invest in TSLA if I believed this is likely.
There is no free lunch (apart from diversification).

So, maybe I should write more about my goals here, and what I tried in the past.
I
- been considering buying a flat to rent out
- have invested in scam P2Ps in Balticum. These were not real companies. I've lost 1k there. Diversification saved me from loosing more.
- have also invested some money into second rank mortages in Austria with 7% interest.
- started "investing" into Mintos and learned that it's a fool's game after 6 months. I exited with 150€ profit.

So I decided, the only place where I want to put my money is the stock market. Call me a speculator or whatever you like. I have my goals. I have read so many books about risk. I believe in diversification if you have some money worth it. But as Kostolany says:

“The one who has heaps of money, can speculate, the one with little money, must not speculate, the one with even less money, must speculate.”
Last edited by herbert_21 on Wed Nov 18, 2020 5:11 am, edited 1 time in total.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

This is the kind of return I am looking for:

Image
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

whodidntante wrote: Tue Nov 17, 2020 3:43 pm It's only 15k, so it doesn't really matter what you do. A total loss wouldn't hurt that badly, and a five bagger wouldn't change your life. Although I do question why you pay such a high interest rate when cheaper options exist.
Are you perhaps talking about futures? Options? Cheaper leverage?

Some asked why I posted this in Bogleheads Forum. Well, I came across viewtopic.php?f=10&t=5934&start=1450.

Here is one quote from @whodidntante
The lesson to me is to dial back the leverage. It's not difficult to avoid bustout if you have a decent income, and access to additional money, and you avoid high multiples of leverage. A lot of Bogleheads do this without even realizing it. They take low interest mortgages that they don't prepay, or buy cars with a low interest car loan in spite of owning hundreds of thousands in securities. That's leverage on your portfolio, all things being equal. It's a spending problem if you do it to buy a car or a house that is too expensive for you.

You can do the same with futures if you don't own a house, or if you do and you just want to increase risk. Also, right now, futures offer leverage at less than 1% borrowing cost. Good luck getting a mortgage that cheap. Rack up some ETFs and then apply modest leverage with futures contracts. This will almost certainly beat an unlevered portfolio over a lifetime. You can use higher multiples but at some point the risk of ruin becomes a legitimate concern.
So this is also something that strikes me:
It is socially accepted to take a 50k loan on an ICE cars. ICE cars depreacciate in value like crazy.
But if you take a small loan in something you truly believe is the future, underappreciated, and will make tons of money, everyone calls you a speculator.

Of course, I don't see it that way. I pay
700/month for my house and
100/month for Tesla.

And I believe this is a completely moderate, while not risk-off way of investing.
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

On what fundamental beliefs and strategy is your ownership of Tesla stock based on?
Tesla is years ahead in
- manufacturing
- full self driving and
- has the best engineers and a team devoted to quality
- is executing well
- a CEO with best track record: PayPal, SpaceX, Tesla
- a compelling business case
- close to 50% growth ahead
- is profitable and
- there are still people who believe this company is a joke. They haven't really looked into the financials, and don't get it.

Tesla is still in it's early innings.
- Model Y in Europe
- Energy business: Storage and Energy Arbitrage "Autobidder".

This company has so much room to grow. It's a bit expensive, yes, some growth is already priced in.
But this is not over. Investing in Tesla today is like investing into Amazon in 2016/2018. We'll see.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by keanoz »

I bought 5 shares of tesla after the split and completely regret it(I know it is not much but still). As soon as it breaks even Im selling and going back to indexing. I like tesla but I think the price appreciation was hype. Tesla is my only loss in my portfolio and seeing it next to my index holdings with six figure gains is a reminder of why I need to stuck to indexing
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares

Post by herbert_21 »

ohboy! wrote: Tue Nov 17, 2020 1:26 pm I can never tell if these threads are trolling or not. Speculation and leverage. The more of this I see the more I think it’s some sort of top. If govt sends out more trucks of money maybe we can pump it further. OP, have you seen wallstreetbets? You can speed up your gamble with options.
Thanks. Yes, I know wallstreetbets. I also looked up your profile. You cashed out in March. What where your reasons? Why did you believe you could time the market? Were you able to cut your losses? Did you get back in already? I am curious.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

keanoz wrote: Wed Nov 18, 2020 5:23 am I bought 5 shares of tesla after the split and completely regret it(I know it is not much but still). As soon as it breaks even Im selling and going back to indexing. I like tesla but I think the price appreciation was hype. Tesla is my only loss in my portfolio and seeing it next to my index holdings with six figure gains is a reminder of why I need to stuck to indexing
Maybe you are investing with the rest of the portfolio. But you are speculating on short term stock price.

Think long term. I suggest to get a perspective where Tesla will be in five years and ten years. Then ask yourself what the stock price will be, and how you will think of yourself now that you sell end of 2020 w/o profit. TSLA is a very volatile stock. People have all kinds of uninformed opinion on it. But analysts are catching up.
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Can retail investors make I difference?
Morgan Stanley gave shares of the electric vehicle maker an overweight rating for the first time in more than three years.

Morgan Stanley predicted that Tesla was on the verge of a "profound model shift" from selling cars to generating high-margin software and services revenue, according to a report from Bloomberg.

"To only value Tesla on car sales alone ignores the multiple businesses embedded within the company," analyst Adam Jonas wrote in a note.

He upgraded the shares from equal-weight and boosted his price target by 50% to $540 a share.
Valuethinker
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Valuethinker »

Herbert

This is a Forum where people generally advise against debt, and celebrate the repayment of debt.

The strategy here is a financially conservative one:

- maximise savings rate
- invest in low cost index funds to maximise diversification
- trade only to rebalance
- prioritise investment over debt repayment only to make full use of tax deferred limits (which are usually annual as to contributions). Debt repayment has a known, certain, risk free return equal to the interest rate of the repayment

We debate when to repay consumer debt - probably the mid-view point here is that it's OK to run your mortgage out to its 25 or 30 year amortisation period (paying off), but other forms of consumer debt should be discharged as quickly as possible.

There are debates around the edges which don't add up to much:

- whether a US investor should internationally diversify (the longest, and most pointless threads, reiterating the same points) - suffice it to say it is clear than a non-US investor should be internationally diversified (I.e. US about 60% of equity exposure)

- whether "factor tilts" like Value really add to performance. There was a wave for Small Cap Value, but the performance of that strategy has been so horrible of late that it might have finished off the fans. For The Record - I believe in Value (of course ;-)) but was agnostic about small caps as an overweighting

- how much one should hedge currency exposure - this is almost irrelevant to American investors, but to the rest of us is a serious issue. I remind people that they are paid in their home currency, their home equity is in their currency, their state pension rights are in their home currency. That's quite a lot of domestic exposure for most of us.

- what is the right risk free investment, particularly with negative bond yields on e.g. German govt bonds (Bunds).

- how much one should borrow to invest, if one should do so at all. The consensus is not on margin (because you can be called). A 10 year loan to buy a stock index fund is probably OK, but no debt on shorter term than that, except to smooth over annual contributions & tax exempt limits.

Many of us have lived through the Dot Com crash and so we know what it's like to endure nearly 3 years where portfolios keep falling in value, and if you were overweight in Tech Media Telecoms it was much worse than that. Many of those companies (Cisco?) have never regained their old highs and even for Amazon I think it took 12+ years.

Other glory stocks/ can't lose stocks like GE have declined to a shadow of their former value. And there was Enron.

Many more of us remember 2008-09, and there were some good threads at the time. It was very hard not to panic, given that household name financial companies were going broke all around us.

The 10 years from 2000-10 were basically dead years in equity, in the decline from the 2000 peak, then the 2008-09 crash.

Others like me remember the Crash of 1987 and losing 25% of your portfolio value in a day.

I was only dimly aware of the 1970s bear market when it was going on, but stocks bought in 1966 did not, after inflation, return to their old values until the mid 1980s.

So what you are doing violates a number of those precepts but particularly picking individual stocks + leveraging up to buy them.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Anon9001 »

Honestly these are all very old people you are talking to and your risk preferences and theirs will not align and you will not get the answer that you want. I would say try to think worst case that this does not work out would you be comfortable with the money going down the drain? If yes then continue if No then don't as stock picking is probability game in that every stock you pick will not be a winner. Some will be extreme losers some will be extreme winners. You don't know ahead of time which ones are which.
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Thanks Valuethinker and Anon9001, appreciate it!
Valuethinker
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Valuethinker »

Anon9001 wrote: Wed Nov 18, 2020 7:21 am Honestly these are all very old people you are talking to and your risk preferences and theirs will not align and you will not get the answer that you want. I would say try to think worst case that this does not work out would you be comfortable with the money going down the drain? If yes then continue if No then don't as stock picking is probability game in that every stock you pick will not be a winner. Some will be extreme losers some will be extreme winners. You don't know ahead of time which ones are which.
When you get to 60 my friend, you will not think that to be "very old".

My 93 year old mother, she is "very old".

"Very old" is always 20 years from where you are.
Valuethinker
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Valuethinker »

herbert_21 wrote: Wed Nov 18, 2020 7:34 am Thanks Valuethinker and Anon9001, appreciate it!
Anon9001 is alluding to a key point.

Money lost on a stock specific bet is money lost *forever*. So you lose all the future compounding you might have earned from it.

That's my 5000 dollars on Nortel once the world's largest telecommunications manufacturer by market cap.

Its not just 5000 dollars it is 20 years of compounding since then, to now, and easily another 40 years to go.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Anon9001 »

Valuethinker wrote: Wed Nov 18, 2020 8:17 am
Anon9001 wrote: Wed Nov 18, 2020 7:21 am Honestly these are all very old people you are talking to and your risk preferences and theirs will not align and you will not get the answer that you want. I would say try to think worst case that this does not work out would you be comfortable with the money going down the drain? If yes then continue if No then don't as stock picking is probability game in that every stock you pick will not be a winner. Some will be extreme losers some will be extreme winners. You don't know ahead of time which ones are which.
When you get to 60 my friend, you will not think that to be "very old".

My 93 year old mother, she is "very old".

"Very old" is always 20 years from where you are.
Well actually I am much younger than 20 years from 60. Counting from my current age it would be 39 years for me to go to 60. But the point still stands. For a guy who is 39 (referring to OP) the risk preferences will be vastly different from some-one who is 60 so it would not be wise to avoid taking some risk if the OP can afford to lose the money.
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Other than risks, there are a few reasons why I invest in Tesla:

Morgan Stanley just updated their price target to Buy literally one day after index inclusion.

Gary Black / Twitter:
Jonas’ $TSLA upgrade one day after S&P’s TSLA inclusion is no coincidence. Jonas has always managed his MS research franchise like a business. With $8T of S&P BM’d active equities now forced to make a decision to own or not own TSLA, Jonas’ potential commission pool just soared.
Recall how analysts get paid. Jonas gets a % commissions on stocks he covers. PMs only pay WS analysts who “help them”. Help means get them access to mgmts of companies they follow. Analysts with buy ratings can get more mgmt mtgs for instit clients. More mtgs = More $. $tsla
Some of the readers might wonder why I don't invest in index funds. Here are some thoughts from Cathie Wood on Twitter
Passive and benchmark-sensitive investing is contributing to the most massive misallocation of capital in history. Investing in companies because of their past successes risks putting the US at a serious competitive disadvantage to countries like China.
Passive investing is unlikely to keep pace with the exponential growth of the five innovation platforms and 14 technologies evolving today. In our view, S&P is depriving benchmark-sensitive investors of some of the most important investment opportunities in the world, like $TSLA.
So, while the S&P 500 was a terrific investment in the last 10, 20 years, and any period longer than 20 years before that, investors in this index left out TSLAs 10x gains.
sd323232
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by sd323232 »

herbert_21 wrote: Wed Nov 18, 2020 8:38 am Other than risks, there are a few reasons why I invest in Tesla:

Morgan Stanley just updated their price target to Buy literally one day after index inclusion.

Gary Black / Twitter:
Jonas’ $TSLA upgrade one day after S&P’s TSLA inclusion is no coincidence. Jonas has always managed his MS research franchise like a business. With $8T of S&P BM’d active equities now forced to make a decision to own or not own TSLA, Jonas’ potential commission pool just soared.
Recall how analysts get paid. Jonas gets a % commissions on stocks he covers. PMs only pay WS analysts who “help them”. Help means get them access to mgmts of companies they follow. Analysts with buy ratings can get more mgmt mtgs for instit clients. More mtgs = More $. $tsla
Some of the readers might wonder why I don't invest in index funds. Here are some thoughts from Cathie Wood on Twitter
Passive and benchmark-sensitive investing is contributing to the most massive misallocation of capital in history. Investing in companies because of their past successes risks putting the US at a serious competitive disadvantage to countries like China.
Passive investing is unlikely to keep pace with the exponential growth of the five innovation platforms and 14 technologies evolving today. In our view, S&P is depriving benchmark-sensitive investors of some of the most important investment opportunities in the world, like $TSLA.
So, while the S&P 500 was a terrific investment in the last 10, 20 years, and any period longer than 20 years before that, investors in this index left out TSLAs 10x gains.
sure buddy, alot of people won the game here, you want to re-invent the wheel, no problem go for it!
Kingswood
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Kingswood »

I am 32, so definitively not higher age than OP, I am from Czech, so nearby with similar conditions. I am employed in private equity as financial analyst.
And Mister, your wake up call will hurt badly. You absolutely ignored any risk diversification and to top of that, you bet on the company with not much room for growth and totally unacceptable risk premium on current earnings level. Even better, your other bets are similar.
I wish you all the luck, you will need it.
I recommend to buy one stock of some broad global index ETF, so you can see your benchmark in those 5-10 years, when these large growth giants all located in US will remain in dust in the very same way, as it happened through all the history up to today, beginning from railway companies and ending with the oil energy sector.
Last edited by Kingswood on Wed Nov 18, 2020 8:43 am, edited 1 time in total.
Anon9001
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Anon9001 »

Well I would say the US market is quite efficient compared to emerging markets but active might do a good job if fees are extremely low (as I read a Swedroe article that US fund managers have tiny alpha over indexes that goes away after expenses). In the end costs matter hypothesis rules and if one doesn't over-pay for stock pickers they might come slightly ahead of indexes. I personally own a active fund but that is primarily due to there being no index equivalent that is tax advantaged for my country. It is charging me 1% annually but I think it is worth it due to there being no index alternatives and also due to local market being in-efficient compared to USA or Developed Markets.
Topic Author
herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

And Mister, your wake up call will hurt badly. You absolutely ignored any risk diversification
Are you sure?

150k in equity in the house.
A good job with about 20 to 25 years of income.
A paid car.
No kids.
Not a frugal life style, but still saving some 25-50% of my income.
Some 70k in stocks with ~40k in equity.

Diversification is not only about stocks. It's about personal life situation.
MishkaWorries
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by MishkaWorries »

Most Americans don't understand how things work in Europe. Europeans can take much more risk in their investments because they have generous government benefits. They don't have to worry about healthcare, their pensions are adequate and (once you have a job) job security is better. Their risks are currency and government solvency. And Austria should be ok in those areas.

So OP using leverage isn't such a bad idea. He's highly concentrated in highly valued sticks. But he's just playing around the edges. He may win this bet or lose this bet. The worse case is if OP wins this bet and he keeps going down the path get rich quick schemes.

It looks like OP is falling for every get rich scheme out there. He keeps chasing unicorns and he'll have a serious losses to contend with sometime in the future.
We plan. G-d laughs.
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Schlabba
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Schlabba »

herbert_21 wrote: Wed Nov 18, 2020 8:38 am Other than risks, there are a few reasons why I invest in Tesla:

Morgan Stanley just updated their price target to Buy literally one day after index inclusion.

Gary Black / Twitter:
Jonas’ $TSLA upgrade one day after S&P’s TSLA inclusion is no coincidence. Jonas has always managed his MS research franchise like a business. With $8T of S&P BM’d active equities now forced to make a decision to own or not own TSLA, Jonas’ potential commission pool just soared.
Recall how analysts get paid. Jonas gets a % commissions on stocks he covers. PMs only pay WS analysts who “help them”. Help means get them access to mgmts of companies they follow. Analysts with buy ratings can get more mgmt mtgs for instit clients. More mtgs = More $. $tsla
Some of the readers might wonder why I don't invest in index funds. Here are some thoughts from Cathie Wood on Twitter
Passive and benchmark-sensitive investing is contributing to the most massive misallocation of capital in history. Investing in companies because of their past successes risks putting the US at a serious competitive disadvantage to countries like China.
Passive investing is unlikely to keep pace with the exponential growth of the five innovation platforms and 14 technologies evolving today. In our view, S&P is depriving benchmark-sensitive investors of some of the most important investment opportunities in the world, like $TSLA.
So, while the S&P 500 was a terrific investment in the last 10, 20 years, and any period longer than 20 years before that, investors in this index left out TSLAs 10x gains.
You're on a forum named after the guy who started the first index fund and wrote entire books about why index investing is the only way to get your fair share of the market returns. Perhaps I could recommend you the book that I enjoyed so much: The Little Book of Common Sense Investing by John Bogle.

The two twitter quotes are just wrong. The book also covers just exactly howmuch you should "trade the news" or "listen to analysts".

I don't mind you making a bet on tesla, but I do hope you go in with your eyes wide open and fully aware of the risks you are taking. If that is the case, have at it. The money you are putting in those individual shares are not in index funds, and we* see index investing as a proven way to slowly, but surely, get rich over the long term.

*If I may speak for multiple bogleheads :happy
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by KlangFool »

herbert_21 wrote: Wed Nov 18, 2020 8:48 am
And Mister, your wake up call will hurt badly. You absolutely ignored any risk diversification
Are you sure?

150k in equity in the house.
A good job with about 20 to 25 years of income.
A paid car.
No kids.
Not a frugal life style, but still saving some 25-50% of my income.
Some 70k in stocks with ~40k in equity.

Diversification is not only about stocks. It's about personal life situation.
herbert_21,

A) I save 1 year of expenses every year. I would be Financially Independence (FI) in less than 20 years with near 0% REAL RETURN.


B) But, I choose to be 100% stock and gamble on the Telecom stocks. That wiped out 50% of my portfolio. It delayed my FI by 5 to 8 years.


C) If you are saving at the rate that you are talking about, why would you buy TSLA? You could achieve your goal by a normal 60/40 portfolio in less than 20 years. The TSLA achieves nothing for you.


It is very simple.


1) I would not buy any individual stock that returns 10% to 20% per year.


2) I only buy an individual stock that may return 10X to 30X in 5 or fewer years.


3) I will put less than 5% of my portfolio into all individual stocks.


You are taking extreme RISK with TSLA with a minimal extra return versus a normal portfolio. It is a lousy bet.

KlangFool
oken
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by oken »

Honestly not sure why OP chose this forum to post. He's spent most of his time defending himself and disagreeing with the comments given.
Kingswood
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Kingswood »

Diversification is King.

You are overconfident in tech industry and you have leveraged specific risk in tech industry, also your income is sourced from tech industry.
Where is you diversification please?

How will your life change, if Europe enters into deflationary environment same as in Japan since 1990? Your stocks and house will lose value, your income will decrease and your debt will remain and you have absolutely no defense against this scenario.
What if anything happens to IT sector, same as air industry was hit this year?
However these are personal things, and everyone has to evaluate them by himself.

On the other hand, investment in four companies with high valuation and not corresponding earning to risk and price, in same sector and same country - that is something, which can be valuated objectively and the risk / reward pattern does not make sense at all. All four companies will have high correlation so basically, there is absolutely no diversification among them. If you want to own 4 stocks only, it should be at least different sectors, different countries and currency risk and also different life cycle of companies.

Lets have a plain view on your opinion of Tesla. TSLA is currently 5times smaller than Saudi Aramco, biggest company market cap wise. If you are looking on continuing 30% return p.a. over the next decade, you are just saying, that Tesla will be 13,7 larger what it is now, despite the fact, that there is already calculated in increase of earnings by 4400%.
It does not even make sense from momentum perspective. TSLA was on all time high on the end of August and it moves sideways since than. If there will not be a significant price momentum in next quarter, TSLA will most probably disappear from momentum indexes (I will be very happy to see that) and when the investment opinion swings on the opposite direction, there will be a long freefall before it hits any valuation support levels.
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herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Uff Misha, that hurt ;-)
But I wrote that I am willing to hear opinions.

Okay, one question for @Kingswood :
Will disruptive innovation generate an alpha in the future? How do you pick "future FAANG" stocks?
Do you understand that I would not have in Tesla when it was at the edge of going bankrupt? Would you agree that the mainstream Wallstreet media simply "doesn't get" declining cost curves, S-curve adoption rates ...

Here is one more quote from Cathie Wood:
According to Wright’s Law, for every cumulative doubling in the number of EVs produced, costs will drop by 18% (corrected from 28% to 18%)later, herbert_21), suggesting that EV prices will drop below those of gas powered vehicles on a like-for-like basis during the next two years.
Even if she is too bullish, she is roughly right.

So what I see in Tesla is exponential growth at a roughly 50 percent rate. As long as people argue with P/E rate, and analysts don't factor in growth, Maybe we should discuss this in the Tesla thread.

Regarding my financial situation:
As Misha laid out correctly, our social system has pension, and I have to add, free health care.

What I am considering is to hedge my growth stock portfolio with some value ETF. Or a few sector ETFs with beaten down sectors, like this:
- Xtrackers MSCI World Financials ETF - ISIN: IE00BM67HL84
- Vanguard Real Estate ETF - US9229085538
-Vanguard Health Care ETF - US92204A5048
But only allocate 10% of the, already levered, portfolio
Last edited by herbert_21 on Wed Nov 18, 2020 9:15 am, edited 1 time in total.
Topic Author
herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Guys,

I see both your arguments regarding diversification, overconfidence. I'll need some time to contemplate on it.

Give me some time.
Last edited by herbert_21 on Wed Nov 18, 2020 9:15 am, edited 1 time in total.
jibantik
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by jibantik »

Speculators gonna speculate.
Anon9001
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Anon9001 »

Realistically Diversification is only good if you don't know what you are doing. The pros like fund managers do this diversification even though they have degrees in finance and their entire job is to pick stocks and in the end they under-perform the index because they end up diluting their best ideas. Also doing this diversification makes their funds behave more like indexes as tracking error in relation to a index goes down the more stocks you add to your portfolio. In the end you are paying the 1-2% fees for closet index tracker because the fund manager do this diversification. So it entirely comes down to how well you know the stocks you are owning. Whether you can do a Discounted Cash Flow valuation of these stocks and justify owning them at the current price. If you can't do that then diversify.
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