I took a 10yr loan to buy TSLA shares

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Topic Author
herbert_21
Posts: 62
Joined: Tue Nov 17, 2020 10:41 am

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

Post by herbert_21 »

happyisland wrote: Fri Nov 20, 2020 2:49 pm Friendly advice to the OP: if you haven't already, spend some quality time reading through the entirety of the Bogleheads wiki, and maybe a Bogleheads book (if you haven't already). Both of those resources will present strong evidence that stock picking is not a good idea.
@happyisland

Just wanted to let you know the following:
I do read all your comments
I ordered the book. It's the beauty of AMZN that it's already on the Kindle, ready to read
I do appreciate your advise

To be continued ...
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4nursebee
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by 4nursebee »

What is the end game goal and how to best achieve that?

What is it that motivated you to do what you did and then come here baiting the BH?
Pale Blue Dot
WienerG
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by WienerG »

Hmmmm.....3/4 of the portfolio in 3 techy large growth stocks. Investing on borrowed money. What could possibly go wrong?

Yes, you're speculating. Hope it works out for you. Sincerely. But I certainly wouldn't recommend what you're doing.
OP,
Servus! You have single company risk with Tesla. You only need Elon Musk to tweet about taking his company private again / about pedoboy etc & the stock could tank. You are on a site that advocates diversification & low cost. If Tesla goes belly up then another company will join the S&P 500 and I'll continue sleeping well. For you, you would have no investment and have loan debt to rub salt in the wound.

You're quite young & I would recommend you review the fate of Barings Bank, the Enron power company or take a look at Lehman Brothers (or in Austria Meinl Bank, BAWAG - Plastik Sackl Geld!). IMHO single company risk is not worth it.

I wish you well, however, be warned you will not convince many here that your approach is nothing other than speculating and I would advise not wasting more valuable effort / time on doing so. You have your plan & you love your girl... Get on and enjoy life! -> that is the reason BH's invest the way they do, so they can get on and enjoy life w/o worrying about stock tickers every day.

WienerG
Last edited by WienerG on Sat Nov 21, 2020 12:00 pm, edited 2 times in total.
manu
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by manu »

2 papers from this week's Rational Reminder podcast that both say it's a bad idea :D

- When stock prices have uncertain future profitability, present value can widely fluctuate due to the convex (exponentially increasing) nature of the function. Reduced uncertainty reduces stock prices. See Pastor and Veronesi, Was there a NASDAQ bubble in 1990s?

- First new technologies are tested in small industries. Their discount rates only reflect their idiosyncratic (single) risk, not market risk. Once new technologies that increase productivity are adopted by old firms, discount rates go up as idisyncratic risk becomes systemic risk, thus reducing current valuations. See Pastor and Veronesi, Tech revolutions and stock prices
srt7
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by srt7 »

Read your first 2 posts so I may have missed something in later ones.

First off ... take Robert Kiyosaki's advice with a pound of salt. Lot of it is common sense and rest is nonsense so no real benefit in following his advice (well ... maybe except for understanding income vs. wealth rich)

Now coming to you ... you don't have an emergency fund but bought 75 TSLA's on loan and think you should buy more ... what brought you to this forum? I'm genuinely curious what you expect from a forum that is principled on long term index based (mostly buy the entire market) investing strategies.
:confused
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happyisland
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by happyisland »

herbert_21 wrote: Fri Nov 20, 2020 5:33 pm
@happyisland

Just wanted to let you know the following:
I do read all your comments
I ordered the book. It's the beauty of AMZN that it's already on the Kindle, ready to read
I do appreciate your advise

To be continued ...
Happy reading!
As I've mentioned from time to time on this forum, I truly feel the https://www.bogleheads.org/wiki/Main_Page changed my life. That, and the wonderful, generous high-quality advice I've gotten from the forums. :sharebeer
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wander
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by wander »

Op, I think you like to put words into people's mouth. If you read people's posts, you need to read the whole discussion before quoting on somebody and assuming that's fact.
kimura king
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by kimura king »

Anon9001 wrote: Fri Nov 20, 2020 1:44 am
NewMoneyMustBeSmart wrote: Thu Nov 19, 2020 5:03 pm
Anon9001 wrote: Wed Nov 18, 2020 8:30 am
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.
I am very sorry, but you are 21. You know almost nothing. Learn don't preach.
I am very sorry but you are all random strangers who I don't know real name of. Why should I trust you people any more than I should trust average person on Reddit,Youtube? I would be more comfortable "learning" if this was not a anonymous forum in which anyone with no qualifications can post.
For clarity, I'm a stranger with a $600 pair of alligator shoes. You’re talking to the Rolex wearin’, diamond ring wearin’, kiss stealin’, wheelin’ dealin’, limousine ridin’, jet flyin’ son of a gun. And I’m having a hard time holding these alligators down.
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happyisland
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by happyisland »

kimura king wrote: Sat Nov 21, 2020 2:21 pm]

For clarity, I'm a stranger with a $600 pair of alligator shoes. You’re talking to the Rolex wearin’, diamond ring wearin’, kiss stealin’, wheelin’ dealin’, limousine ridin’, jet flyin’ son of a gun. And I’m having a hard time holding these alligators down.
Whoo!
Valuethinker
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Valuethinker »

WienerG wrote: Sat Nov 21, 2020 2:06 am
Hmmmm.....3/4 of the portfolio in 3 techy large growth stocks. Investing on borrowed money. What could possibly go wrong?

Yes, you're speculating. Hope it works out for you. Sincerely. But I certainly wouldn't recommend what you're doing.
OP,
Servus! You have single company risk with Tesla. You only need Elon Musk to tweet about taking his company private again / about pedoboy etc & the stock could tank. You are on a site that advocates diversification & low cost. If Tesla goes belly up then another company will join the S&P 500 and I'll continue sleeping well. For you, you would have no investment and have loan debt to rub salt in the wound.

You're quite young & I would recommend you review the fate of Barings Bank, the Enron power company or take a look at Lehman Brothers (or in Austria Meinl Bank, BAWAG - Plastik Sackl Geld!). IMHO single company risk is not worth it.

I wish you well, however, be warned you will not convince many here that your approach is nothing other than speculating and I would advise not wasting more valuable effort / time on doing so. You have your plan & you love your girl... Get on and enjoy life! -> that is the reason BH's invest the way they do, so they can get on and enjoy life w/o worrying about stock tickers every day.

WienerG
Wirecard comes to mind.

Apparently it had a big following among German retail investors.
WienerG
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by WienerG »

Valuethinker wrote: Sat Nov 21, 2020 5:26 pm
WienerG wrote: Sat Nov 21, 2020 2:06 am
Hmmmm.....3/4 of the portfolio in 3 techy large growth stocks. Investing on borrowed money. What could possibly go wrong?

Yes, you're speculating. Hope it works out for you. Sincerely. But I certainly wouldn't recommend what you're doing.
OP,
Servus! You have single company risk with Tesla. You only need Elon Musk to tweet about taking his company private again / about pedoboy etc & the stock could tank. You are on a site that advocates diversification & low cost. If Tesla goes belly up then another company will join the S&P 500 and I'll continue sleeping well. For you, you would have no investment and have loan debt to rub salt in the wound.

You're quite young & I would recommend you review the fate of Barings Bank, the Enron power company or take a look at Lehman Brothers (or in Austria Meinl Bank, BAWAG - Plastik Sackl Geld!). IMHO single company risk is not worth it.

I wish you well, however, be warned you will not convince many here that your approach is nothing other than speculating and I would advise not wasting more valuable effort / time on doing so. You have your plan & you love your girl... Get on and enjoy life! -> that is the reason BH's invest the way they do, so they can get on and enjoy life w/o worrying about stock tickers every day.

WienerG
Wirecard comes to mind.

Apparently it had a big following among German retail investors.
Yes Valuethinker. Wirecard is a more recent & very relevant example of single company risk!
Maverick3320
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Maverick3320 »

I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a singe stock.

Then when people say your move is foolish, you get upset. The small minority that says "do what you want", you thank them. If you are so much smarter than the Boglehead masses, why bother to stoop to our level and post here? Isn't being an expert stock picker and knowing something about Tesla that apparently no one else knows enough for you?


What is the purpose of your post?
spectec
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by spectec »

I just want to thank the OP for speculating. After all, if there weren't speculators my index fund might not be reflecting accurate market prices. Somebody has to take the risks, pocket the excess profits, and suffer the disproportionate losses.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers
Topic Author
herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Maverick3320 wrote: Sun Nov 22, 2020 7:20 am I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a single stock.

Then when people say your move is foolish, you get upset. The small minority that says "do what you want", you thank them. If you are so much smarter than the Boglehead masses, why bother to stoop to our level and post here? Isn't being an expert stock picker and knowing something about Tesla that apparently no one else knows enough for you?

What is the purpose of your post?
Who said it's foolish? Those guys that compare Tesla with Wirecard?

Sorry. There were friendly comments, helpful comments, critical comments and worthless comments. I read all of them.

I was wondering if talking about a taboo (investing on margin) is acceptable, and then I decided to give it a go. As I wrote in the opening post, I don't really have a lot of friends to discuss the topic. I thought that a Bogle forum could be the place to discuss this, and my personal situation.

P.S. Better comparison to Wirecard is Nikola.
Last edited by herbert_21 on Mon Nov 23, 2020 7:04 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 »

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%.
I have a different suggestion:
Let"s look at the 10 biggest companies not by market cap, but by revenue. Most of them are energy companies.

Now let's imagine some of their revenues is replaced with green energy. I tend to believe that this very likely and that this will happen within the next 20 years.

Someone asked where future Tesla revenues could come from. In last earnings call, Tesla's CEO mentioned that the energy business could be as big as automotive business. This is the far-out future (5+ years).

So, apart from supporting the world's transisition to sustainable energy, I also believe that this stock could could up to $2 trillion, which would be x4 from here.

Game plan
So, since Tesla stock has increased in value, my plan is now to repay about $10k and then refinance with cheaper interest rate. Either.with mortage on my house or with 1,25% interest at Degiro broker. I will repay small loans first, using the "debt snowball" method just in case someone is interested.

I am carefully monitoring my Alibaba investment. There is some risk of delisting in the US.
Kingswood
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Kingswood »

I do not get your point, can you explain more?
First oil industry (traditional energy sector) is definitely not replaceable by home roof solar panels only, not even closely. Majority of electricity for EV will still be produced by large power plants where Teslas share will be 0, as it is retail company.
Revenue is also actually not a good indicator of anything, as noone will benefit from revenue. Net Income or earnings on level of EBITDA is important. Commodities and energy sector itself happens to have quite low margin (unlike retail), as noone cares who exactly produced your energy (price is main driver here, not a company brand). Solar panels are also quite a commidity like clean energy item, as you can quite easily copy the technology and produce them mass scale in China and distribute them around the world... unlike things like wind blades for power plants... So I really do not care if Tesla is going to be a part of the energy sector or not, its not important at all.

I actually thought, you knew that the only price point potential for Tesla is their autonomous driving system. Which however is not ahead of competition as Tesla tries to look like.

Anyway, do whatever you want. You already heard a lot of opinions here, I do not get your point of view on tesla stock by fundamental value and time will tell easily if you are right or not. There is long way ahead of tesla to even prove their current valuation of 900+ P/E , so there is no necessity to talk about valuation growth now, free cash flow will always ultimately decide.
Valuethinker
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Valuethinker »

herbert_21 wrote: Sun Nov 22, 2020 2:30 pm
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%.
I have a different suggestion:
Let"s look at the 10 biggest companies not by market cap, but by revenue. Most of them are energy companies.

Now let's imagine some of their revenues is replaced with green energy. I tend to believe that this very likely and that this will happen within the next 20 years.

Someone asked where future Tesla revenues could come from. In last earnings call, Tesla's CEO mentioned that the energy business could be as big as automotive business. This is the far-out future (5+ years).

So, apart from supporting the world's transisition to sustainable energy, I also believe that this stock could could up to $2 trillion, which would be x4 from here.

Game plan
So, since Tesla stock has increased in value, my plan is now to repay about $10k and then refinance with cheaper interest rate. Either.with mortage on my house or with 1,25% interest at Degiro broker. I will repay small loans first, using the "debt snowball" method just in case someone is interested.

I am carefully monitoring my Alibaba investment. There is some risk of delisting in the US.
Leveraging when you are young to buy equities has some logic *if* you cannot be called. I.e. if in a major market downturn, you can hold your position (and psychologically, your nerve). Thus for example if your job is secure and you can increase your mortgage.

That's borrowing long term to finance purchases of equity indices (tracker funds). However we should remember Japan - the possibility of a 30 year bear market. That, plus memories like the UK market losing 80% in 18 months in the middle of the 1970s, haunts us all. I can see a set of macroeconomic or geopolitical events which cause an enormous market crash. And then there are the "black Swans", the "unknown unknowns"-- the world's financial regulators had prepared for something like Lehman Brothers insolvency, but when it actually happened, it turned out no one was really ready. And Lehman was a relatively small bank in the scheme of things - roughly $480bn of assets.

However to buy individual stocks? You are betting that somehow you have seen something in a stock which the market as a whole has missed. All those analysts at all those investment banks, who speak to the company regularly and pour over its figures AND all those incredibly bright investors with access to the best databanks and research.
Topic Author
herbert_21
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Let's evaluate my decision on 21/12/2020
Valuethinker
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Valuethinker »

herbert_21 wrote: Mon Nov 23, 2020 10:37 am Let's evaluate my decision on 21/12/2020
You mean 21/12/2025?

Or 21/12/2030?

Most of us pay capital gains taxes on realisation of profits. My average stock holding period, now, is probably over 10 years.

If I traded more often than that the tax drag on returns would kill me. Losing say 28% every time I sell.
Valuethinker
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Valuethinker »

Another thing I should mention is that while mortgage money is typically 25 or 30 years to repay (but not in your late 50s!) Outside USA mortgages are not usually fixed rate. Maybe 5 years max?

Thus if there is a surge in interest rates while you are in the middle of a bear market, you can get crushed even though your loan cannot be called.
WienerG
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by WienerG »

herbert_21 wrote: Sun Nov 22, 2020 1:47 pm
Maverick3320 wrote: Sun Nov 22, 2020 7:20 am I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a single stock.

Then when people say your move is foolish, you get upset. The small minority that says "do what you want", you thank them. If you are so much smarter than the Boglehead masses, why bother to stoop to our level and post here? Isn't being an expert stock picker and knowing something about Tesla that apparently no one else knows enough for you?

What is the purpose of your post?
Who said it's foolish? Those guys that compare Tesla with Wirecard?

Sorry. There were friendly comments, helpful comments, critical comments and worthless comments. I read all of them.

I was wondering if talking about a taboo (investing on margin) is acceptable, and then I decided to give it a go. As I wrote in the opening post, I don't really have a lot of friends to discuss the topic. I thought that a Bogle forum could be the place to discuss this, and my personal situation.

P.S. Better comparison to Wirecard is Nikola.
OP,

No one compared Wirecard to Tesla - if that is what you understood, then you are wildly mistaken. We indicated in clear terms that by investing in single companies you have an increased risk when compared to diversified index funds. Wirecard is an example of a fintech that suddenly disappeared after posting very strong results. Take Volkswagen and the exhaust fume scandel - such an event could wipe out Tesla. We were purely warning you in no uncertain terms that investing in single companies carries a significant risk. And borrowing to do so adds to that risk. The consensus is that you are speculating (very risky). I have seen many get burnt doing what you're doing.

If you feel this advice is worthless (as is your right), then I do not understand why you posted here in the first place. If you only want to hear confirmations of your risky investment approach, then you are in the wrong place - this is a site focussed on diversification and long term gains and constructively challenges any post. Let's agree to circle back to your portfolio on 31.12.2050 to see how well you did compared to others here. I for one will be happily retired and sleeping well at night.

I honestly wish you well in your endevours.

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

Post by Valuethinker »

WienerG wrote: Wed Nov 25, 2020 5:00 am
herbert_21 wrote: Sun Nov 22, 2020 1:47 pm
Maverick3320 wrote: Sun Nov 22, 2020 7:20 am I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a single stock.

Then when people say your move is foolish, you get upset. The small minority that says "do what you want", you thank them. If you are so much smarter than the Boglehead masses, why bother to stoop to our level and post here? Isn't being an expert stock picker and knowing something about Tesla that apparently no one else knows enough for you?

What is the purpose of your post?
Who said it's foolish? Those guys that compare Tesla with Wirecard?

Sorry. There were friendly comments, helpful comments, critical comments and worthless comments. I read all of them.

I was wondering if talking about a taboo (investing on margin) is acceptable, and then I decided to give it a go. As I wrote in the opening post, I don't really have a lot of friends to discuss the topic. I thought that a Bogle forum could be the place to discuss this, and my personal situation.

P.S. Better comparison to Wirecard is Nikola.
OP,

No one compared Wirecard to Tesla - if that is what you understood, then you are wildly mistaken. We indicated in clear terms that by investing in single companies you have an increased risk when compared to diversified index funds. Wirecard is an example of a fintech that suddenly disappeared after posting very strong results. Take Volkswagen and the exhaust fume scandel - such an event could wipe out Tesla. We were purely warning you in no uncertain terms that investing in single companies carries a significant risk. And borrowing to do so adds to that risk. The consensus is that you are speculating (very risky). I have seen many get burnt doing what you're doing.

If you feel this advice is worthless (as is your right), then I do not understand why you posted here in the first place. If you only want to hear confirmations of your risky investment approach, then you are in the wrong place - this is a site focussed on diversification and long term gains and constructively challenges any post. Let's agree to circle back to your portfolio on 31.12.2050 to see how well you did compared to others here. I for one will be happily retired and sleeping well at night.

I honestly wish you well in your endevours.

WienerG
WienerG

The "comparing Wirecard to Tesla" thing is known in English as a "straw man argument". Create an argument that you allege the other side is making, that is extreme, and then knock it down.

Because schools no longer teach rhetoric and reasoning (or so it seems) we are deficient in understanding how arguments are deployed and their flaws. We can see that with "fake news" -- this tendency to fail to interrogate sources, eg on F-book posts -- failure to check snopes.com for example (I now give regularly to snopes.com). You see it in the widespread belief in various conspiracy theories. I certainly did not learn this in my high school nor undergraduate education, mostly.

Perhaps Continentals are better educated in school and this is an Anglo-Saxon problem? When you add an understanding of behavioural economics - of how humans reason in the real world, and what our predictable biases (see Dan Arielly "Predictably Irrational") are, then it can become quite powerful.

I agree the problem for a thinly capitalized company like Tesla is it lacks deep reserves to overcome a major product flaw or other accident (pun ;-)). It is like a thin very fast growing plant coming out of the undergrowth. Also there is Musk's tendency to engage in complex corporate deals with companies that he has a stake in, when the commercial logic with Tesla itself is weak. And his random personality (calling one of the cave rescuers a "pedo" etc).

I also agree re justification of a decision already taken. To be fair to Herbert21 he seems genuinely to be listening to the arguments we make but only he could know what, inside himself, would actually change his mind.

But it's not an approach we would endorse here. On the main US investing board, there's been good discussions of the possibilities of leveraging up at a young age to buy more equities (as suggested in a book by Yale U professor Barry Nalebuff. I don't know what Robert Shiller, also of Yale, thinks of that idea). Indeed there was an epic thread with poster "market timer" about his experiences doing same in 2008-09, right during the Crash. (FWIW, he now has a very conservative portfolio with something like 25%+ cash).
glorat
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by glorat »

Valuethinker wrote: Wed Nov 25, 2020 8:46 am When you add an understanding of behavioural economics - of how humans reason in the real world, and what our predictable biases (see Dan Arielly "Predictably Irrational") are, then it can become quite powerful.

I also agree re justification of a decision already taken. To be fair to Herbert21 he seems genuinely to be listening to the arguments we make but only he could know what, inside himself, would actually change his mind.
Taking behaviour and psychology into mind here, let's try to do something constructive in this thread. Let's assume Herbert21 has now figured out Deep Inside that this endeavour is a bad idea. However, psychology is an important part. Admitting you're wrong is tough. Ignoring FOMO is tough, especially if one has conviction in one's market selection.

What would be a sensible path to transition to a portfolio more aligned with boglehead philosophy that doesn't pave the road with regret?

For example, simply saying de-lever everything, sell it all and buy back into a 3-fund portfolio is probably a terrible idea from a human perspective. IMHO. There is a good chance Tesla will be fine and the FOMO will wreck any long term Bogleheadness. There will be no personal learning. "If it were me", is also arguably not helpful advice since we are already the converted. It's more about setting a path for one's mindset to be gradually won over - allowing small mistakes to learn from without blowing up with fatal mistakes.
Escapevelocity
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Escapevelocity »

If not for threads like this, wouldn't this forum get kind of boring? I mean how many ways can you debate the finer points of a 3 fund portfolio?
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Ramjet
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Ramjet »

Escapevelocity wrote: Wed Nov 25, 2020 10:41 am If not for threads like this, wouldn't this forum get kind of boring? I mean how many ways can you debate the finer points of a 3 fund portfolio?
Was thinking it but you said it!
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Ramjet
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Ramjet »

Maverick3320 wrote: Sun Nov 22, 2020 7:20 am I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a singe stock.
Some of the most successful threads on Bogleheads have been on unconventional topics, e.g., Market Timers infamous thread and Hedfundies Excellent Adventure. Plus, the OP seems like he knew what he was getting into.
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4nursebee
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by 4nursebee »

Ramjet wrote: Wed Nov 25, 2020 11:02 am
Maverick3320 wrote: Sun Nov 22, 2020 7:20 am I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a singe stock.
Some of the most successful threads on Bogleheads have been on unconventional topics, e.g., Market Timers infamous thread and Hedfundies Excellent Adventure. Plus, the OP seems like he knew what he was getting into.
Really? Is this such a great pick? Everyone is on it, not so great a choice. TSLA is beginning it's markup and distribution phase.
Pale Blue Dot
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Ramjet
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Ramjet »

4nursebee wrote: Wed Nov 25, 2020 12:02 pm
Ramjet wrote: Wed Nov 25, 2020 11:02 am
Maverick3320 wrote: Sun Nov 22, 2020 7:20 am I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a singe stock.
Some of the most successful threads on Bogleheads have been on unconventional topics, e.g., Market Timers infamous thread and Hedfundies Excellent Adventure. Plus, the OP seems like he knew what he was getting into.
Really? Is this such a great pick? Everyone is on it, not so great a choice. TSLA is beginning it's markup and distribution phase.
I don't like when people are discouraged to post because the topic is not "Boglehead" enough. That is my point, nothing else.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by checkyourmath »

I enjoy the random discussion but a PE ratio of 1000 is slightly too high for me. I am much more comfortable in the PE range of 15-25. You have to wonder what the car world will look like in a 1000 years from now when Tesla's earnings have equaled the value of the company. My recommendation is the 30 year mortgage needs to be thrown out the door. We need 500 and 1000 year mortgages.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Hi all,

First, I read all your comments. Thanks for your suggestions, comments.
Second, I think finally this thread makes some sense: Am I taking individial company risk (which is in Markowitz sense "uncompensated" risk)? Yes
Is this risk even higher since I am using loans? Yes Is this an interesting thread: I hope so.
Third, do I have plans to switch into a more serious asset allocation at some point? Yes, sure. My first goal 50k has already been reached. I am considering doing a combination of 20 tech stocks or index funds at some point, let's say, when I'm at 100k.

Let me elaborate on individual stock risk:
- Pretty much every passive investor would calling into one individual stock risky
- A portfolio of growth stock is considered riskier, because of it's high beta
- I don't see growth stock on a long term basis more risky, but more volatile. Time in the market makes the difference
- Investing in the long term in growth stocks should be rewarded by efficient market hypothesis
- Bogle talks about reversion to the mean a lot. I'm really really curious to see, if value finally kicks in and outperforms growth in the upcoming decade. This might be a misconception in itself, because, in the end, what is a value stock (e.g. low P/B).
- On the other hand, if we look into what performed best starting from end of March, beginning of April, that wasn't the tech stocks, but those stocks that were beaten down the most. Which indicates reversion to the mean actually works.
- And of course, there is diversification

What the discussion about asset allocation should really be about first, is goals:
Are your goals to build some wealth (make money) or to defend (keep) your money?
Do those two goals require the same way of building a portfolio?
If they are different, are they different in a) investing style b) diversification

Tesla is now my biggest position, with about 33% of the portfolio.
The gains are simple HUGE. I'm up 11k / 43%. I started investing into Tesla in September this year.
If I sell now I'd have to pay 27,5% taxes on the gains. So, per today, one could even argue that it would be irrational to sell the stocks and repay all loans. I know that this must read terrible to some of you, and some people also called me a speculator. Call me what we want, but investing into a company with doing lots of DD isn't the dumbest thing, especially if it works. And yes, I have read "Thinking, fast an slow" and I know about overconfidence. But this is about me, my asset allocation, and not some random book.

So main focus is now on getting best conditions.
I am considering the following:
-Talk to my bank (plan a).
-Put in 15k so that they see I have the money (not sure if it makes a difference regarding my "Bonität" aka credit score)
-Ask for an increase of my mortage secured with the house. After everything is done I should get a 1% rate or so from the bank. +
-Kill all high-percentage consumer loans.
I'd end up with only one load with the lowest-possible interest rate (-160k) and a portfolio of 80k. That'd be very nice IMHO.

Here are my TSLA aquisitions so far:

Date Amount Share Price
19.11.2020 1,00 Stk. 420,60 EUR
30.10.2020 5,00 Stk. 334,25 EUR
05.10.2020 14,00 Stk. 360,60 EUR
23.09.2020 10,00 Stk. 328,25 EUR
22.09.2020 10,00 Stk. 360,00 EUR
15.09.2020 5,00 Stk. 368,55 EUR
14.09.2020 31,00 Stk. 322,90 EUR
76 pieces of Tesla, each worth €481 (no dollar price as US market is closed during Thanksgiving)
Plan was to aquire 100 pces. 8 positions in portfolio, out of which one is ARKK actively managed ETF.

Price is somewhat close to what I consider a fair price ($600 conservative, $720 most recent PT from Gary Black).
Maybe I'll buy 4 more when I find the money, and buy some 20 shares after Christmas. I expect share dropping after Dec 21st, when the index inclusion is completed. This went up much faster than I had anticipated.

I just wanted to say that 20k is a LOT of money. I'd need to work half a year for this, and it's almost impossible to work so many overhours to earn this.

Will keep you posted
Last edited by herbert_21 on Fri Nov 27, 2020 12:16 pm, edited 1 time in total.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by herbert_21 »

Total portfolio gains: 20k
Out of which Tesla is: 11k
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Valuethinker »

herbert_21 wrote: Fri Nov 27, 2020 8:19 am . And yes, I have read "Thinking, fast an slow" and I know about overconfidence. But this is about me, my asset allocation, and not some random book.
I just wondered if you realised how (unintentionally?) hilarious that line was?

If you read Burton Malkiel, A Random Walk Down Wall Street, in layman's language he has the stats about "violations" of efficient market hypothesis. There's also literally *thousands* of academic papers. The overwhelming conclusion of all of that research is that the market is Type II efficient - you cannot outperform without access to private information, not available to other market participants. So corporate insiders do outperform, but fund managers in general do no better than monkeys picking stocks by throwing darts at a dartboard.

But you can also look at the returns from say the Vanguard S&P 500 index fund. That has the nearly 50 years of history, if you can find the data.

(Fama & French probably have some data on the degree of underperformance by active managers. If not them, try Campbell Harvey at Duke University's website, or Asworth Damodaran at NYU).

What you cannot find is an active manager who has outperformed that fund, for that long. You find people like Bill Miller at Legg Mason Value Fund, who outperformed S&P500 for 13 years, then lost all that outperformance, and more, in the last 3 years he ran the fund.

Peter Lynch at Magellan Fund retired before it began underperforming. So really a roughly 12 year run.

There's a lot of evidence that if you do find a "hot hands" fund, then you'd better get in very early, because the average investor gets on board after the fund has done its outperformance.

There's always Warren Buffett. Probably the longest sustained, public, track record of outperformance-- over 50 years. Some quite good academic work on the source of his outperformance -- in effect a leveraged bet on the Low Volatility anomaly (low beta stocks outperform high beta stocks, in the long run).

We can all dream about being Warren Buffett.
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Re: I took a 10yr loan to buy TSLA shares

Post by Anon9001 »

It entirely depends what market you are talking about. The same Malkiel said China A shares that active managers overwhelmingly beat passive indexes. If we are limiting ourselves to Eurocentric Western view of "Market" than yes it is efficient and highly impossible to beat for most active managers.
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Re: I took a 10yr loan to buy TSLA shares

Post by herbert_21 »

Email to the bank is out. Let's see what they say.

P.S. I LOVE Asworth Damodaran, the dean of valuation.
But he sold his Tesla shares way too early. Here is a blog entry including a video on his Tesla investment:

http://aswathdamodaran.blogspot.com/202 ... tesla.html and http://aswathdamodaran.blogspot.com/202 ... tesla.html
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Re: I took a 10yr loan to buy TSLA shares

Post by LadyGeek »

He's in the wiki: Aswath Damodaran
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Re: I took a 10yr loan to buy TSLA shares

Post by Valuethinker »

Anon9001 wrote: Fri Nov 27, 2020 9:01 am It entirely depends what market you are talking about. The same Malkiel said China A shares that active managers overwhelmingly beat passive indexes. If we are limiting ourselves to Eurocentric Western view of "Market" than yes it is efficient and highly impossible to beat for most active managers.
Glad you think developed markets are Type II efficient (no outperformance with publicly available analysis and information). That's c 80% of world markets by market cap?

Malkiel kind of went off the deep end on China, I think.

The point about active management in a market like China is that things are inefficiently priced. Indeed my impression of Far Eastern investors in places like China is that they treat the stock market as another kind of casino. So momentum and rumour are big factors.

However I do know from former colleagues who invest in Emerging Markets, that the main problem is simply that there is an enormous amount of inside information and insider trading in these markets. Party officials will of course know what is going on at these companies long before the general public, and that information seems to be employed.

A lot of the trick in EM seems to be knowing where the weight of money is flowing. External capital (which is the majority of the money invested, unless we are talking about markets like China and Saudi Arabia which are restricted to foreigners) flows in, the stocks are mostly illiquid, drives prices up. Then something happens macro/ political, and it flows out again. The money will flow to the headline, biggest and most liquid stocks, because there's no other way to build up a position. Valuation? Earnings trend? These are less important.

I do hold a Far East ex Japan smaller companies ETF. Because it's basically full of companies I have never heard of, (as opposed to simply a huge weighting in TSMC in a straight index fund), and the headline valuation numbers look reasonable. There have to be some gems buried in there. Whereas say the big Chinese internet stocks? They look to have similar valuations to their western equivalents, with all the additional concerns about accounting, corporate governance etc.

You know that old line "in poker, if you haven't figured out who the mug is within 5 minutes, you are the mug" -- See "Molly's Game" with Jessica Chastain and Kevin Costner for some great examples of this (it's based on the story of the woman who ran the highest stakes poker game in America, for a while).

Well in these markets the western fund manager is very much the mug. The insiders have the advantage. Russia? 10 times the case. If they don't like you they get you sentenced to a long prison term - -where you may mysteriously die from some previously undiagnosed ailment. Magnitsky Act etc.

I will say that the quality of sell-side company analysis coming out of China sometimes impresses - Chinese nationals, educated in the west, doing the CFAs, going back and doing quality work. The problem is the level of company disclosure (plus not at arm's length dealing etc). If you saw the movie "The China Hussle" you can see the problems of doing quality investment work in China - for example that it is illegal to investigate a company if you are a private citizen.

It's one reason why I am not full index weight in EM. Although I do hold an EM Dividend tilted fund/ ETF. My logic being that "talk is cheap, whiskey costs money". i.e. that a dividend is as strong as possible a credible signal that the cash and the underlying productive assets of the company really are there, and the benefits are accruing to shareholders. It has underperformed wonderfully ;-).
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Re: I took a 10yr loan to buy TSLA shares

Post by Anon9001 »

It would be very interesting to see TESLA performance when interest rates go back to normal. I think in-directly you are betting on interest rates staying down OP by buying growth stocks like this as high P/E multiples like 50 equals to 2% earnings yield which is good compared to negative yielding bonds but bad if bond yields go up due to un-expected inflation. Also this might be why value stocks have been slumbering for 10 years.
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Re: I took a 10yr loan to buy TSLA shares

Post by Anon9001 »

Valuethinker wrote: Fri Nov 27, 2020 10:36 am Glad you think developed markets are Type II efficient (no outperformance with publicly available analysis and information). That's c 80% of world markets by market cap?

Malkiel kind of went off the deep end on China, I think.

The point about active management in a market like China is that things are inefficiently priced. Indeed my impression of Far Eastern investors in places like China is that they treat the stock market as another kind of casino. So momentum and rumour are big factors.

However I do know from former colleagues who invest in Emerging Markets, that the main problem is simply that there is an enormous amount of inside information and insider trading in these markets. Party officials will of course know what is going on at these companies long before the general public, and that information seems to be employed.

A lot of the trick in EM seems to be knowing where the weight of money is flowing. External capital (which is the majority of the money invested, unless we are talking about markets like China and Saudi Arabia which are restricted to foreigners) flows in, the stocks are mostly illiquid, drives prices up. Then something happens macro/ political, and it flows out again. The money will flow to the headline, biggest and most liquid stocks, because there's no other way to build up a position. Valuation? Earnings trend? These are less important.

I do hold a Far East ex Japan smaller companies ETF. Because it's basically full of companies I have never heard of, (as opposed to simply a huge weighting in TSMC in a straight index fund), and the headline valuation numbers look reasonable. There have to be some gems buried in there. Whereas say the big Chinese internet stocks? They look to have similar valuations to their western equivalents, with all the additional concerns about accounting, corporate governance etc.

You know that old line "in poker, if you haven't figured out who the mug is within 5 minutes, you are the mug" -- See "Molly's Game" with Jessica Chastain and Kevin Costner for some great examples of this (it's based on the story of the woman who ran the highest stakes poker game in America, for a while).

Well in these markets the western fund manager is very much the mug. The insiders have the advantage. Russia? 10 times the case. If they don't like you they get you sentenced to a long prison term - -where you may mysteriously die from some previously undiagnosed ailment. Magnitsky Act etc.

I will say that the quality of sell-side company analysis coming out of China sometimes impresses - Chinese nationals, educated in the west, doing the CFAs, going back and doing quality work. The problem is the level of company disclosure (plus not at arm's length dealing etc). If you saw the movie "The China Hussle" you can see the problems of doing quality investment work in China - for example that it is illegal to investigate a company if you are a private citizen.

It's one reason why I am not full index weight in EM. Although I do hold an EM Dividend tilted fund/ ETF. My logic being that "talk is cheap, whiskey costs money". i.e. that a dividend is as strong as possible a credible signal that the cash and the underlying productive assets of the company really are there, and the benefits are accruing to shareholders. It has underperformed wonderfully ;-).
I am more of a believer in Costs Matter Hypothesis as Swedroe article showed that active managers in USA do show tiny alpha gross of fees. Net of fees they under-perform of course. A market cannot be fully efficient as it is filled with humans who are emotional and can do mistakes and that can be taken advantaged of by active managers to the extent they out-perform slightly gross of fees. Even more if the market is full of retail investors like China A shares. I think that might be why active management is ruling there along with the lack of transparency and insider trading that you cited.
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Re: I took a 10yr loan to buy TSLA shares

Post by Ramjet »

Anon9001 wrote: Fri Nov 27, 2020 10:47 am It would be very interesting to see TESLA performance when interest rates go back to normal. I think in-directly you are betting on interest rates staying down...
Probably a good bet, no? Obviously there are no guarantees
Last edited by Ramjet on Fri Nov 27, 2020 11:11 am, edited 1 time in total.
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Re: I took a 10yr loan to buy TSLA shares

Post by Anon9001 »

Ramjet wrote: Fri Nov 27, 2020 11:08 am
Anon9001 wrote: Fri Nov 27, 2020 10:47 am It would be very interesting to see TESLA performance when interest rates go back to normal. I think in-directly you are betting on interest rates staying down...
Probably a good bet, no? Obviously there are no gaurantees
Demographics wise the USA is in better position compared to Europe and Japan and even China even though it is significantly richer than China so if we assume demographics and interest rates are linked then betting on TESLA seems to bad idea.
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Re: I took a 10yr loan to buy TSLA shares

Post by Ramjet »

Anon9001 wrote: Fri Nov 27, 2020 11:11 am
Ramjet wrote: Fri Nov 27, 2020 11:08 am
Anon9001 wrote: Fri Nov 27, 2020 10:47 am It would be very interesting to see TESLA performance when interest rates go back to normal. I think in-directly you are betting on interest rates staying down...
Probably a good bet, no? Obviously there are no gaurantees
Demographics wise the USA is in better position compared to Europe and Japan and even China even though it is significantly richer than China so if we assume demographics and interest rates are linked then betting on TESLA seems to bad idea.
I'm sorry, should have been more clear. Meant betting on interest rates remaining low, not TSLA
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Re: I took a 10yr loan to buy TSLA shares

Post by Anon9001 »

Ramjet wrote: Fri Nov 27, 2020 11:13 am
Anon9001 wrote: Fri Nov 27, 2020 11:11 am
Ramjet wrote: Fri Nov 27, 2020 11:08 am
Anon9001 wrote: Fri Nov 27, 2020 10:47 am It would be very interesting to see TESLA performance when interest rates go back to normal. I think in-directly you are betting on interest rates staying down...
Probably a good bet, no? Obviously there are no gaurantees
Demographics wise the USA is in better position compared to Europe and Japan and even China even though it is significantly richer than China so if we assume demographics and interest rates are linked then betting on TESLA seems to bad idea.
I'm sorry, should have been more clear. Meant betting on interest rates remaining low, not TSLA
I don't know about the future of interest rates to be honest. Neither do professionals. At best a guess would be that considering favourable demographics of USA that inflation will continue to happen and interest rates must go up in that scenario from current level.
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Re: I took a 10yr loan to buy TSLA shares

Post by pseudoiterative »

Anon9001 wrote: Fri Nov 27, 2020 10:47 am It would be very interesting to see TESLA performance when interest rates go back to normal. I think in-directly you are betting on interest rates staying down OP by buying growth stocks like this as high P/E multiples like 50 equals to 2% earnings yield
If you reckon 50 is a high P/E multiple for a growth stock, have you checked out a little stock named Tesla recently? :) Trailing earnings per share of $0.53 / share, current market price of $594.60 / share, giving a trailing P/E multiple of about 1122 - effectively an earnings yield of 0.0008920%. It ain't merely interest rates. If you compare to some other random trendy growth company which (like Tesla) has only recently claimed a net annual profit, e.g. Peloton, they've managed to double their revenue for the last 3 financial years, are operating under the same market conditions of interest rates, and have a trailing P/E multiple of 95.

Tesla's current market price ($594.60 at time of writing) could be supported on future earnings from their auto sales alone, if you don't price in any discount for risk and assume the cost of capital to build new factories is zero* and assume that Tesla's auto sale revenue will grow steadily at 39% year on year for the next 9 years and then terminate to grow at 2%, say, as a mature company. This series of hypothetical annual growth rates assumes that Tesla will have the highest revenue of any auto manufacturer, with 2030 revenue comparable to the combined revenue of VW and Toyota, the two auto manufacturers that currently have the highest revenue. That assumed 39% yoy growth rate isn't some reality-based estimate of supply constrained by how fast factories can be spun up, or mass-market demand for a large share of the auto market, it's just me plugging a number into a spreadsheet until it can give a valuation comparable to the current share price offered by Mr Market.

* a zero cost of capital to build new factories would be ridiculous for any boring established auto manufacturer like VW, but isn't such a terrible assumption for Tesla in the short run: while the market enthusiasm for the stock persists at such high P/E multiples, Tesla can continue to raise additional cash to fund capex by issuing more and more shares to acquire $1000 of cash from shareholders for each $1 of trailing earnings. It'd be interesting to see how many shares they'd have to issue to get the P/E multiple to drop to something like 50. Or maybe momentum traders would keep bidding the price up faster than the company could dilute shareholders.
Last edited by pseudoiterative on Fri Nov 27, 2020 12:29 pm, edited 1 time in total.
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Re: I took a 10yr loan to buy TSLA shares

Post by herbert_21 »

Anon9001 wrote: Fri Nov 27, 2020 10:47 am It would be very interesting to see TESLA performance when interest rates go back to normal. I think in-directly you are betting on interest rates staying down OP by buying growth stocks like this as high P/E multiples like 50 equals to 2% earnings yield which is good compared to negative yielding bonds but bad if bond yields go up due to un-expected inflation. Also this might be why value stocks have been slumbering for 10 years.
Question: How will states, governments pay back their debt with what you call normal?
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Re: I took a 10yr loan to buy TSLA shares

Post by vitaflo »

My observation. 10k in one stock is nothing when eventually you're going to have $1m+ to retire on anyway, it's in essence fun money. Taking a loan for it is stupid. You would be much better off trying to increase your sweat equity, ie make more money. It will have a much higher multiplicative effect than stock picking and you have direct control over it.

Expecting a 10x gain in a short window of time on a stock that just did this is a fools errand. If you want those gains you need to pick the next Tesla, not the current one. Investing most of your portfolio in a few American companies when you're not American puts a lot of your risk also in America and its rules and laws. Another thing to consider.

In short, money in Tesla is fine, don't expect 10x gains, but use your own money not the banks and work on getting a raise to pay for it.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Maverick3320 »

Ramjet wrote: Wed Nov 25, 2020 11:02 am
Maverick3320 wrote: Sun Nov 22, 2020 7:20 am I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a singe stock.
Some of the most successful threads on Bogleheads have been on unconventional topics, e.g., Market Timers infamous thread and Hedfundies Excellent Adventure. Plus, the OP seems like he knew what he was getting into.
Why were those threads successful?
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Re: I took a 10yr loan to buy TSLA shares

Post by Anon9001 »

A brighter idea is to use this loan to buy more of a Growth Index. It should be more diversified than owning only TSLA if OP has the view-point that Growth stocks will continue to out-perform while having less risk of a black-swan happening in which the entire loan goes to 0.
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Re: I took a 10yr loan to buy TSLA shares [Austria]

Post by Ramjet »

Maverick3320 wrote: Fri Nov 27, 2020 1:01 pm
Ramjet wrote: Wed Nov 25, 2020 11:02 am
Maverick3320 wrote: Sun Nov 22, 2020 7:20 am I don't understand the point of the original post. You come on Bogleheads, of all places, and then discuss your strategy to borrow money to purchase a singe stock.
Some of the most successful threads on Bogleheads have been on unconventional topics, e.g., Market Timers infamous thread and Hedfundies Excellent Adventure. Plus, the OP seems like he knew what he was getting into.
Why were those threads successful?
Interest, entertainment, and post count, not outcome. Maybe successful is the wrong word? Interesting maybe?
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Re: I took a 10yr loan to buy TSLA shares

Post by Valuethinker »

herbert_21 wrote: Fri Nov 27, 2020 12:12 pm
Anon9001 wrote: Fri Nov 27, 2020 10:47 am It would be very interesting to see TESLA performance when interest rates go back to normal. I think in-directly you are betting on interest rates staying down OP by buying growth stocks like this as high P/E multiples like 50 equals to 2% earnings yield which is good compared to negative yielding bonds but bad if bond yields go up due to un-expected inflation. Also this might be why value stocks have been slumbering for 10 years.
Question: How will states, governments pay back their debt with what you call normal?
Austria issued a 100 year bond. Repayment is a long ways away.

In practice countries roll their debts. They borrow again.

If you have the privilege of borrowing in your own currency you can just keep doing that.
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Re: I took a 10yr loan to buy TSLA shares

Post by Schlabba »

Hi Herbert,

I found an interesting video where Tesla (and other companies in the EV space) are being compared to the Bicycle index: https://youtu.be/HeWLcsgBpgM

Edit: and just by coincidence Ben Felix did a relevant video as well https://youtu.be/UZnVt_CvL3k
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