Borrowing money from family to invest..

[Pog0]

Simple prospect.

My sister does not invest her money. She's got $y in a savings account paying 0.05% (and I did not misplace my decimal) yearly compounded monthly.

My offer: borrow her money at a rate of x% per year compounded annually.

I have very little investment knowledge, but I have much of my money in growth and aggressive growth mutual funds. I'll just do the same with hers and pay her her x% yearly and repay is whenever she chooses to take it out.

What's the highest you'd allow x to be if you were to invest y in mutual funds and expect a positive expectation? High risk tolerance.

I did not include numbers or my thoughts because I feel they are irrelivant. Any thoughts would be appreciated.

[Sniper]

1. Do you plan to invest differently based on the specific X% you are paying her?

2. Are you prepared to cover X% should you have a losing year?

3. Have you taken the taxes you will have to pay into consideration?

4. She's your sister, why don't you just educate her?

[Pog0]

1. I plan to invest aggressively and I have no trouble covering a losing year
2. Yes, as mentioned above
3. I have not given much thought to taxes, although they crossed my mind
4. I have, but she's unbelievably risk averse and is unwilling to take any gambles. She also doesn't want to lock her money away in GICs with long maturity dates. I've tried to convince her to just get her own funds to no avail, so I'm trying to offer a win win situation here.

Let's change the scenario slightly. If random person Z offered to loan you money that you are free to invest on your own. What's the highest rate you would be willing to give out (you have no reason to accept this offer unless you are confident that you stand to gain from the deal).

[DesertCat]

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I have very little investment knowledge, but I have much of my money in growth and aggressive growth mutual funds.

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This is a pending disaster. It doesn't matter what interest rate you pay, what you need to think about is how do you handle a year in which your investments are down 30-40%. This happens occasionally with "aggressive growth" type funds.

If your sister was truly risk averse, she wouldn't let you touch her money with a ten foot pole.

[eastbay]

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4. I have, but she's unbelievably risk averse and is unwilling to take any gambles.

[/ QUOTE ]

Then turn her on to 4% at emigrant. This is probably more than you should offer her anyway.

eastbay

[buffett]

[ QUOTE ]
Then turn her on to 4% at emigrant. This is probably more than you should offer her anyway.

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[Officer Farva]

Take 1.5 percent of her assets yearly. And 20 percent of her profit. Use Ridge Regression to find near-term mis-harmonies in the fx market on forward interest rate contracts, then hedge out broad market exposure. Then go play 5-10NL 6-max at party. Word out homey.

[randomstumbl]

I think 3-4% is probably close to the market rate if you have a very, very low risk of ruin.

You hopefully have a better idea of the chance that you'll go bankrupt than I do though. If I were loaning you the money, I know I'd want a lot more than that.