Question for the Investment gurus

**sweeps** · 05-20-2006, 05:22 PM

Re: Question for the Investment gurus

Unless you're talking subsidized loans, it's probably not worth the risk. Interest rates on student loans are going way up.

**jmjj215** · 05-20-2006, 07:46 PM

Re: Question for the Investment gurus

Sweeps!!!! At this point, you're supposed to talk Pharmer into getting a loan on Prosper. Come on..

In all seriousness, I don't think it's a great idea to borrow the money for two reasons: 1) the reason Sweep cited and 2) that's not what the money is there for.

But boy, is it tempting!

**genchan** · 05-20-2006, 08:31 PM

Re: Question for the Investment gurus

It's probably not worth the time and effort for what you'd earn, but you can run the numbers and decide for yourself. What rate would the student loans be at and compare that to what you can get in a low risk investment (CD or such since you won't want to be putting it into the stock market most likely)

**Duchesse** · 05-21-2006, 03:38 AM

Re: Question for the Investment gurus

I agree with the gurus. The interest on low risk investments against the interest you would pay on the student loans. You wouldn't yield very much for the headache of managing the money.

I have a question as well for the gurus, In terms of low risk investments for the ULTRA conservative. I am aware of Money Markets, bonds (government), CD's, blue chip and preferred stocks, indices, my question, Did I miss any?

**Duchesse** · 05-21-2006, 04:30 AM

Re: Question for the Investment gurus

Originally posted by rexdart

I am most certainly not one of the gurus. I noticed you didn't mention T-bills and T-notes but I'm assuming you meant those as well when you said government bonds.

not entirely sure blue chip and preferred stocks or indexes belong in there if you want to keep that "ULTRA" tag.

To Rex and All

Yes I forgot about them. I don't know very much about them. The rate is 4.6% the last I heard. What is a T-note and how is it different from a T-bill. The banks are giving these rates. I didn't see any advantage over a bank MM at that rate. Can someone give me some insight on these T-notes and T-bills?

You could be right about the ULTRA tag but with the rates offered to the conservative investor (MM, CD, T-bills, T-notes, EE bonds, I bonds)you have to be involved in the stock market. Mutuals are the stock market, you're just taking someone elses picks.) I consider myself very risk intolerant. I think some stocks can be considered "conservative".

**sweeps** · 05-21-2006, 10:01 AM

Re: Question for the Investment gurus

Treasury bills mature in 1 year or less. Treasury notes mature anywhere from over 1 year to 10 years. Treasury bonds have maturities beyond 10 years. Other than that, there is no difference, they are all bonds offered by the Treasury.

Current rates can be found at Bloomberg.

Holding individual bonds (for example, through Treasury Direct) to their maturity is ultra-safe. However, you can potentially lose money if you buy a fund that holds Treasury or any other type of bonds. The reason is mutual funds rarely hold bonds to their maturity. On the other hand, you can earn more than the underlying value of the bonds for the same reason.

"Blue chip" stocks, preferred stock, and index funds are not "safe". Not to say they are bad investments. But you can lose your principal at any time. (And Jesse -- you still have yet to convince me that Prosper is safe.

)

Duchesse, if you are 100% risk-averse, then I would say put your money in short term CDs for now. (6-month CD at GMAC is paying 5.2%.) If you live in a state with high income tax, you can also do very well with T-Bills, although they require a little extra effort.

**sweeps** · 05-21-2006, 10:17 AM

Re: Question for the Investment gurus

Originally posted by rexdart

[Treasury bond] interest is not taxed federally (but I think usually is by the state).

Vice versa.

**Duchesse** · 05-21-2006, 01:59 PM

Re: Question for the Investment gurus

No problem Rex.

At Sweeps, I really appreciated your advice on the CD's, I also laddered them because I checked it for myself and found it to be sound. It suited my needs at this time. I am trying to find out as much as I can about all types of investments. The "safer" the better. Yet I know that to make any real money one must take some risk. I am risk adverse, but not 100%. I am willing to play the stock market but only to a point. My approach is my own and with it I can sleep at night. That's what's important to all of us as we search for the best way to achieve our goals.

I am so appreciative of all of the responses because two heads are better than one.

**TTUPharmer** · 05-21-2006, 08:01 PM

Re: Question for the Investment gurus

I appreciate all the points this thread got me

**tgavin71** · 05-21-2006, 08:59 PM

Re: Question for the Investment gurus

Personally I would not take out the loans. You mentioned that your parents are going to help you but we can never be sure what is going to happen in the future and you may need to take out a loan to pay for part of your education. Find out how much the loan payments will be and put that amount into investments.

**TTUPharmer** · 05-21-2006, 09:35 PM

Re: Question for the Investment gurus

Originally posted by tgavin71

Personally I would not take out the loans. You mentioned that your parents are going to help you but we can never be sure what is going to happen in the future and you may need to take out a loan to pay for part of your education. Find out how much the loan payments will be and put that amount into investments.

I like that idea better, thanks

**Duchesse** · 05-22-2006, 04:22 AM

Re: Question for the Investment gurus

Originally posted by rexdart

I was just picking on you about the ultra thing Duchesse, sorry 'bout that. no harm intended.

T-bills are very short term instruments (up to 26 weeks I believe). you buy them at a discount and they mature to their face value.

T-notes are interest paying instruments that run up to 10 years in duration.

10 years and over is a T-bond.

as far as I understand it, the interest is not taxed federally (but I think usually is by the state).

here's a link to the Treasury Direct website if you want to read a little more.

the true gurus will be along shortly to fill in the holes!

Thanks for the info Rex. I went to TreasuryDirect.gov and found out a little more about T-bills. Now tell me if I am correct and if there are others who have personal experience with T-bills please let me know.

T-bills are bought at a discount and mature in 4-26 weeks at par value (face amount at maturity) $1000 minimum investment required. The interest paid or the yield to the investor is the par value $1,000 - (discount price) = yield.

One question, is the "yield" paid on maturity or prorated daily at an annual rate for 13 weeks like in the case of CD's and Money Market accounts?

If I buy a T-bill at a discount price of $950. and it matures in 13weeks do I receive $1000 at the end of that 13 weeks?

**flash** · 05-25-2006, 12:42 PM

Re: Question for the Investment gurus

Originally posted by TTUPharmer

Ok, I'm starting pharmacy school in the fall. I will not need loans to pay for my school as my parents are helping me out. Should I take out the loans I've been offered and invest them over the next four years and then pay them back as soon as I am required to and pocket the interest/yields etc?

Or should I just not mess with it and enjoy the fact that I don't need loans?

If your parents are helping you out, let them invest the loans and reap the rewards.

Seriously, don't play with fire. If your investments don't pan out, you don't get a job immediately, some other emergency occurs, you might need those loans.

Question for the Investment gurus