Taking $100,000 loan to invest in the S&P

Honestly yeah do it. I’m excited to see who gives a 22 year old a $100K unsecured loan at 400bps and excited to see you experientially figure out that the data behind an 800bps avg is not all 800bps

There are quite a few considerations:

Supposing your 8% average holds, assume you take a 1y 100k loan @4%. What do you do if the stock market crashes shortly before the loan matures? do you liquidate at a loss and cover the difference? Can you cover 34k of losses on a couple of months notice (S&P lost 34% in the COVID stock market crash) ?

What do you do if after 7-9 month you achieve less than 4% returns?  Are you willing to sit down, watch yourself losing money while doing nothing or go for a more agressive strategy? If you would go for the latter then what could be your maximum loss?

Most imporatntly don't go lazy by taking the 8% average for granted, 8% average return could also mean that the return would be: 1% the 1st year, (5)% 2nd year and  28% the 3rd year following Trump reelection. So what kind of a year will 2022 be? Do you like the current state of the economy and the current valuation of the S&P 500 considering all the liquidity that has been pumped into the system?  How do you expect interest rates hikes and subsequent liquidtiy drain to impact your investment? What are the geopolitical considerations (Russia, Ukraine, Taiwan, China)? Could the next COVID-19 variant be deadlier? 

Not saying you should have an answer to all of this but at least make an opinion for yourself before making the decision and don't just lean on some historical based statistical number.

Where are you going to get an unsecured loan at 4%?  Mortgage rates are 4%.  If you owned a house free and clear it could be a good idea to get a 30yr mortgage as long as you can cover the mortgage if the investment goes south.  But you probably don't own an unleveraged property.  Even if you were looking at 6% rates, your spread is only 2%, and that's even assuming you're going to get 8% return in the market over the term of the loan.  So your spread is only 2%, and that's before taxes.  After long term capital gains you'd have $100,000 of risk capital invested for a 1.7% return.  Do you think that's worth it?

It probably isn't tax deductible... So you're paying 4% post tax and earning 7% pre tax. Personally not a margin I'd be comfortable with but you do you

Some considerations...

1) Cash Flow Timing: The loan will likely have periodic (monthly) payments. Assuming you deploy all 100k into the market, will you have to liquidate some of your position (potentially at a loss) to cover the interest payment?

2) Loan Maturity/Payback Terms: Are there penalties for early payback? Is the duration of the loan shorter, longer, or around the same period as your latency between entering and exiting this investment?  

3) Capital Gains Tax: Need to consider the impact to your total effective return

4) Average Market Returns: Not sure what period you're considering, but I thought the number was closer to 10-11%? Whatever your target is, I would conservatively lower it by at least 25% to see if your model is still economic 

5) Who Underwrites this Loan?: Having trouble thinking of what firms would do this. Ones that could fill will likely view you as risky and tick-up that I/R or have some pretty strict covenants which may underpin the strategy you employ

6) Equity: You'll likely have to post up cash to leverage. Could your capital be better used elsewhere (e.g., higher return, better risk-adjusted returns, whatever)? Do you have the capital to get the leverage?

7) Downside Consideration: Could you weather a prolonged period of correction, stagnation, or recession? Could you still cover the loan under these scenarios? What if you lost everything in the market, what comfort could you give lenders that you'll make them whole?

The list goes on. TLDR; if it were this easy, then why isn't everyone doing it? 

We do this all the time, come join us.

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You clearly have never gone to a bank for a personal loan. You think people get Auto loans and then turn around and spend that money on a house? Or a mortgage and then spend that money on multiple ferrari's? What you intend on doing with the loan determines the duration...rate... and more importantly whether or not the bank would even lend you the money.

You might be better off asking for a debt investment from friends / parents at 4-5% fixed if you're trying to work this theory out. Your gains figures are also pre tax whereas the interest you'd fork over is post-tax. Apples to oranges

This is the signal to short SPY

Its a better idea than the dudes who bought crypto on CCs couple years back.

The math is easy. The question is should you. It's up to you. I wouldn't do it if the margin is tight (i.e. a 10% drawdown means you have a margin call). But there are many investors / theories that it is better for young people to do this in order to smooth out investment contributions (rather than the majority of contributions to the market coming in folks' 30s and 40s)

You can also view your expected savings over your lifetime as the portfolio you're managing. Most of that would be comparable to low-risk / annuity investments. Using this perspective moving 100k form annuities to a more risky asset class could have merit (only a small part of your lifetime portfolio, which is conservatively held), given that it works out in practice (as comments above have pointed out).