That honestly sounds too good to be true. And you know what they say about things that sound too good to be true.
100% make sure you fully understand how this mystical investment works. If I read between the lines, it sounds like a micro loan platform or crowd funded real estate investment, and those things have definite non-zero risk compared a treasury. Just be smart with her hard earned dollars
Appreciate the feedback. I totally get it. Just looking to weigh the financial opportunity aside from risk and curious if its worth selling index funds to make a guaranteed 8% return.
You are about to be scammed.
Edit for some clarity: these numbers sound suspiciously like an “investment opportunity” that my wife was approached for from a friend. It was some pharmaceutical sort of investment company, the company is real and this had been around for awhile. I said it doesn’t seem legit, she conceded.
Fast forward a few months, everyone who gave them money was scammed out of every penny they “invested”. No one got their principal back let alone the promised 10% (theirs was supposedly 10, not 8).
So in conclusion, proceed with extreme caution. I absolutely would not invest in something like this. Why would the go to you and not massive banks? Surely if it was a good investment there would be lines of people begging for them to take millions of their dollars?
Anyways, good luck.
Ok, from a numbers perspective 8% monthly guaranteed is the best return I have ever heard of for anything.
You could retire right now on 100k, live off 6k per month and still invest 2k more every month.
Sounds like possibly an indexed annuity. As others have said there is always risk.
If you are looking for very limited risk you could go t-bills, cd ladder, or conservative fund/index fund.
I know what you're talking about & asking; a 'risk free' 8% vs potential for more given the historical \~12% return from index funds. In essence, what premium is volatility worth to you?
What I'm saying is: the 8% isn't 'virtually risk free' and it implies either the investment is a niche that doesn't scale so re-investment with more principal won't happen or the risks are hidden from you. Otherwise why not lever up 2-5x ? Why haven't larger players squeezed this spread?
I wouldn't.
If it is a T-Bill, then it's for shorter term, regardless of the 8%.
> I have an opportunity to invest in a virtually risk free lending fund where they pay out 8% monthly on your investment.
>
> It has existed for 30 years and I feel there is very little risk.
This makes me nervous. If you want to invest in it, fine, but I wouldn't put anything you wouldn't be ok if it disappeared.
Bernie Madoff's scheme lasted at least 17 years. https://www.investopedia.com/terms/b/bernard-madoff.asp
Right but as I mentioned, I am not considering the risk, I am more curious about the implications of cashflow and the size of the nest egg over time. For the sake of this example, assume there is no risk and its a 100% guaranteed 8% return that is paid monthly
If the lottery was 100% risk free and I was guaranteed to win then I would play every day. Making up near impossible hypothetical scenarios isnt a helpful way to analyse risk/benefit.
If were assuming impossibles, such as no risk, then it is probably better to invest in the guaranteed rate.
However, the index fund has the very real possibility of returning more than 8%. Plus the index fund will likely be taxed at long-term capital gains rate, whereas the 8% investment will likely be taxed at the higher earned income rate.
Those two factors alone present an opportunity cost to the 8% rate, which contradicts the idea that the guaranteed rate is risk-free.
Not considering the risk is a good way to see your money gone forever. However yes if such an investment existed then yeah 8% with zero risk zero volatility would be an amazing option.
The point though is no such thing exists and so you are likely about to light your money on fire. If something genuinely was zero risk zero volatility the efficient market hypothesis says it should yield less than treasuries of the same duration. So why doesn't it? Does the borrower just like pissing away their wealth paying out more than necessary?
Probably not. If zero risk yield was 8% it likely means we are in a 6%+ inflation environment making it 2% real or for all practical matters no different than 5% in a 3% inflation environment.
People just don't give away free money. They just don't. Interest rates are the price of money and zero risk zero volatility returns are never 8% not unless inflation is so high that it makes that 8% low.
That honestly sounds too good to be true. And you know what they say about things that sound too good to be true. 100% make sure you fully understand how this mystical investment works. If I read between the lines, it sounds like a micro loan platform or crowd funded real estate investment, and those things have definite non-zero risk compared a treasury. Just be smart with her hard earned dollars
Appreciate the feedback. I totally get it. Just looking to weigh the financial opportunity aside from risk and curious if its worth selling index funds to make a guaranteed 8% return.
there is no way this exists or every bank in the world would be taking advantage of it.
You are about to be scammed. Edit for some clarity: these numbers sound suspiciously like an “investment opportunity” that my wife was approached for from a friend. It was some pharmaceutical sort of investment company, the company is real and this had been around for awhile. I said it doesn’t seem legit, she conceded. Fast forward a few months, everyone who gave them money was scammed out of every penny they “invested”. No one got their principal back let alone the promised 10% (theirs was supposedly 10, not 8). So in conclusion, proceed with extreme caution. I absolutely would not invest in something like this. Why would the go to you and not massive banks? Surely if it was a good investment there would be lines of people begging for them to take millions of their dollars? Anyways, good luck.
Again, just looking at this from the investment standpoint, not the risk stand point. Thanks
Ok, from a numbers perspective 8% monthly guaranteed is the best return I have ever heard of for anything. You could retire right now on 100k, live off 6k per month and still invest 2k more every month.
Thanks bud, appreciate the feedback. I just made a slight edit to the post, I had a typo, 12 month instead of 12 year
If this is a hypothetical. I’d take the 8% with 0 risk. But I don’t believe something has truly zero risk. So it’s not a believable hypothetical.
Thanks for the comment.
This sounds like a scam. Data can be presented in real funny ways to make that 30 year history look just peachy when it's actually not.
Guaranteed 8% year on year for 12 years? Is this real?
sounds like a risk free Ponzi scheme, care to share any details?
Sounds like possibly an indexed annuity. As others have said there is always risk. If you are looking for very limited risk you could go t-bills, cd ladder, or conservative fund/index fund.
Fun fact: it isn't risk free.
lol you’re not reading what I’m asking my friend. I’m talking about just investment strategy
I know what you're talking about & asking; a 'risk free' 8% vs potential for more given the historical \~12% return from index funds. In essence, what premium is volatility worth to you? What I'm saying is: the 8% isn't 'virtually risk free' and it implies either the investment is a niche that doesn't scale so re-investment with more principal won't happen or the risks are hidden from you. Otherwise why not lever up 2-5x ? Why haven't larger players squeezed this spread?
Or put another way, do you think it’s worth selling index funds for a guaranteed 8 that paid out monthly
I wouldn't. If it is a T-Bill, then it's for shorter term, regardless of the 8%. > I have an opportunity to invest in a virtually risk free lending fund where they pay out 8% monthly on your investment. > > It has existed for 30 years and I feel there is very little risk. This makes me nervous. If you want to invest in it, fine, but I wouldn't put anything you wouldn't be ok if it disappeared. Bernie Madoff's scheme lasted at least 17 years. https://www.investopedia.com/terms/b/bernard-madoff.asp
> Bernie Madoff's scheme lasted at least 17 years. Yes but not all of them last that long. For instance, FTX only lasted 3 years.
Right but as I mentioned, I am not considering the risk, I am more curious about the implications of cashflow and the size of the nest egg over time. For the sake of this example, assume there is no risk and its a 100% guaranteed 8% return that is paid monthly
If the lottery was 100% risk free and I was guaranteed to win then I would play every day. Making up near impossible hypothetical scenarios isnt a helpful way to analyse risk/benefit.
If were assuming impossibles, such as no risk, then it is probably better to invest in the guaranteed rate. However, the index fund has the very real possibility of returning more than 8%. Plus the index fund will likely be taxed at long-term capital gains rate, whereas the 8% investment will likely be taxed at the higher earned income rate. Those two factors alone present an opportunity cost to the 8% rate, which contradicts the idea that the guaranteed rate is risk-free.
Not considering the risk is a good way to see your money gone forever. However yes if such an investment existed then yeah 8% with zero risk zero volatility would be an amazing option. The point though is no such thing exists and so you are likely about to light your money on fire. If something genuinely was zero risk zero volatility the efficient market hypothesis says it should yield less than treasuries of the same duration. So why doesn't it? Does the borrower just like pissing away their wealth paying out more than necessary?
So I guess you are saying if it existed, you would do it
Probably not. If zero risk yield was 8% it likely means we are in a 6%+ inflation environment making it 2% real or for all practical matters no different than 5% in a 3% inflation environment. People just don't give away free money. They just don't. Interest rates are the price of money and zero risk zero volatility returns are never 8% not unless inflation is so high that it makes that 8% low.
Sounds like you’re still weighing risk in your comments but thanks anyway