Forum Archive Index - September 2000

["Out to lunch" <galeforce@hotmail.com>]

Having been there done that in terms of spending a student loan on shares, 
my advice would be not to do it.  Of course at the time (1991-2) I thought 
it was a great idea, I was given an entitlement to easy money which I 
thought I only had to draw down, invest in shares for a while, then sell the 
shares, pay it back and keep the profits.  But over time those interest 
payments do add up and now I have a sizeable overhead each and every year to 
offset against my investment returns.  So as you can imagine my priority now 
is to clear the loan ASAP which is costing me almost as much as I pay in 
rent.  Sure, I didn't blow it on a stereo, a car, or other acts of blind 
stupidity, but all the same I don't think it is a good idea unless you have 
a level head when assessing what is a good share to invest in and are 
prepared to spread your risk widely.  And after all that, you still need to 
make more than, what is it, 7% a year, just to break even on your interest 
payments.

However it did give me the opportunity to learn a hell of a lot about 
investing in shares at the time when I knew nothing except that everyone 
loved Brierley and that I should therefore buy some.  Now, if I have a share 
that everyone is raving about, I'll sell it.  I've been stung a few times by 
buying shares that, in hindsight, were obviously in unsound, over-hyped or 
high-risk companies and my choices were nothing like what I would now call 
‘value' investing.  That's been a great lesson, and I'm glad that I have 
learned from making mistakes in the 1990s with a few thousand dollars rather 
than make the same stupid calls with much larger sums of money later in 
life.  So in that sense I've benefitted a lot out of having student loan 
money to play with when I was studying.

It all depends on which way you look at it.  Of course there is no mention 
of actually using the loan for what it is intended which doesn't really ring 
true either.

My 2c (+ 7% p.a) worth.

Cheers, H.
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