should i borrow from bank at lower % and invest in a fund (read more)?

Question

Hi, i found out about an investment fund for "big boys" with a minimum entrance of 100,000 euro. After which you get a 100% guaranteed return of 10% annually and can deposit and withdraw when you wish. (i need to double check if this is really true). My question is: would it make sense to borrow from my bank 100,000 euro and invest into this fund. I haven't checked with my bank yet, but i would expect a much lower the borrowing interest rate?
Thank you for all your advice.

Answer 1

Well after you investigate more thoroughly and find it is ligitimate, I would do it. I am doing it. I'm taking 10% loan to invest with much bigger returns. How do you think the rich got rich? And I do know that guaranteed returns are possible. Just make sure it is a ligitimate deal.

Answer 2

All things being equal, that would be a wise investment as long as the borrowing costs are below 10%. BUT, how can anyone guarantee 10%? If they returned an AVERAGE of 10%, that's one thing, but I don't see how anyone can GUARANTEE that you'll get 10% annually.

I would check them out carefully before you borrow from a bank and invest. If they're a scam (an from what you're saying, it sounds like it), it would be really bad if they took of with the funds and then you have to pay back the bank 100,000 Euro + interest.

Answer 3

Who is guaranteeing the 10% return? A promise to pay is only as good as the entity making the promise. That's almost twice the rate of return currently avaialable on interest-bearing investments in the US which implies that there's an element of risk that forces the borrowers to offer such a high rate. Also, is the investment insured by an entity like FDIC?

In the US it would make sense to borrow money and invest it in an interest-bearing account if the account was insured and if the after-tax earnings exceeded the interest on the loan. It would not make sense to borrow at 5% and earn 5.01% if the earnings were taxable and the interest was not, but if you could borrow at 6% and earn 10% taxed at 15% so that you net 8.5% it would make sense.

The 10% rate raises a red flag for me!

Answer 4

No investment professional in the world would guarantee returns. So this "investment fund for big boys" is most likely a scam. Do not give them any money and do not even think of borrowing to invest with them; you won't get a loan and you will become the laughing stock of your bank.

Answer 5

If what you say is true and you are confident that they would pay you the 10% guaranteed income and that you can withdraw principla any time you want with no penalty seems like a bargain.

As long as the arbitrage in interest rates are good and at least 3 to 4 point spread you have a good deal. Make sure you understand the penalty clauses before you sign on. Is your investment insured should the company go belly up.

Good luck

Answer 6

If this investment was safe, it would make sense to borrow money to invest in it. But the chance that it is safe is extremely low. I don't care if you're a "big boy" with a billion dollars to lend, you can't find a safe investment which yields 10% in today's financial climate. There has to be a catch. Most likely you are dealing with a scam, and will lose everything. Scammers frequently claim they have secret ways to invest, that only the "big boys" can use. The link below discusses some of these scams. The link mostly discusses scams in the United States, but similar scams are done elsewhere.

Answer 7

DO NOT DO THIS!

In the U.S. it is illegel to "guarantee" a return in any kind of investment fund. And I'd bet it is the same in Europe as they are also highly regulated.

There is NO WAY an honest firm can guarantee ANY return, let alone a 10% return.

It is even harder to guarantee a return of any type when you allow members to withdraw as they wish, as this leaves less funds overall to invest.

I wouldn't touch this cause you are probably goingto get scammed.