buying mutual funds with refi $

I was thinking that everytime I refi or get a HELOC to take 3k and buy mutual funds. Does anyone do this? why and why not?

no different than taking a HELOC to buy investment property. You’re betting that your earnings will outstrip the interest you’re paying. the biggest difference is being in control of the investment (buying, selling a property with research into local markets, demand, etc.) or being tied up in an investment that you have no control over (busted oil pipes anyone?).


What your talking about is called “arbitrage” it is how banks make money. They pay low interest rates on CD’s and savings accounts and then loan that money out at higher rates and keep the difference. However for the small amount that you are talking about you may end up spending close to 3K in closing costs. You are thinking outside the box though. There is a book called “Missed Fortune 101” by Douglas Andrew that covers this subject in detail. Good Luck.

no absolutely not. that is a terrible idea for reasons stated already.

I am going to take a HELOC out and by another house with little or no money down. Say I have $20,000 and use $3000 to get into the house and $8000 in upgrades. How can I make the remaining balance make money for me?

Buy another house…


All decisions in business are functions of the numbers. The numbers will tell you if you should put the remainder in a mutual fund or not. What is the rate you pay for the HELOC funds? What return can you get from the mutual funds. I would guess your HELOC is at 6%. The mutual fund will return 3%. Looks like you should not do the mutual fund.

first, read rich dad poor dad and the prophecy by Rob Kiyosaki, hell read books on warren buffet.

mutual funds are an absolute waste of time and they are risky ventures that yield crappy results usually.

think about it.

take 6000 and buy…fidelity contrafund (at least back a few months ago, this was a “great” mutual fund) or pick a good oppenheimer fund - aggressive in nature.

if it DOUBLES IN unit price…say from 60 a share to 120 in a month - which NEVER OR VERY INFREQUENTLY HAPPENS. how much money did you earn? okay - 6000. BIG DEAL. and that’s if it takes “a month” or two or three - but in most cases it takes A LONG TIME for it to grow.

buy contrafund or an oppenheimer fund three months ago and see where you’re at today…HELLO!

you’re 6000 is somewhere around 4700 now…

mutual funds = complete lack of control. no control because of 2 main reasons - 1. you make no decisions regarding how the 50 companies in a given fund will manage their respective business and 2. you, the “investor” sit back and click on a website once a day/week/month/year, expecting results with NO EFFORT.

i took all of my money out of mutual funds. the only mutual fund i own now is through my 401k - and it’s mostly in a money market earning d*ck because i don’t feel like “diversifying” and “investing for the long haul” - i’ve done that and lost or gained next to nothing with mutual funds. they’re the poor/lazy man’s way of “investing”.

don’t waste your time - take that “left over” money and put it in to your business account to help manage your properties. use it for the payments on your HELOC. use it to make another purchase. buy a note and sell it. whatever…

Hi…going to have to agree with most of the people in here. I used to invest all my money in stocks and studied it for about 20 years now. After all this time I am taking money out and putting it in real estate. Someone correct me if I’m wrong but the average mutual fund earns the long term average of the stock market over the long run. Since 1929, the stock market on average has returned around 10.5%. My hope is to do better than this in real estate. Of course just my opinion. :slight_smile:


but how has the mutual fund mania over the past 30 years impacted the stock market…

think about it - a show like Kramer or a tv channel such as CNBC would have NEVER made it 20 years ago.

401k and other tax deferred entities and just the marketing of all the mutual funds available, plus the internet, has changed the face of “investing” and makes schlubs think they are “investors”.

if you’re a knowledgeable stock trader or options guy/gal then you have your pulse on the flow of businesses. that’s different and 10.5% is pretty good.

the bottom line though is you have NO CONTROL over such investments, period - stocks and mutual funds are marketed big time to the average person who is NOT an investor.


Your right…the only control you have with mutual funds is to decide the risk level of the fund you want to invest. Generally, the younger you are the more you might lean towards riskier portfolios. For anyone who has ever thoroughly studied the stock market and mutual funds, it is very clear that it is extremely difficult to consistantly beat the average stock market annual return. Any honest mutual fund mananger will tell you this. This if Finance 101. I will not go into the reasons for this as this is a real estate site :slight_smile:

That being said, I do find it a very prudent idea to fully take advantage of your 401K. Put all you can into the tax-deffered plan using an array of mutual funds that balance between risky and safe [/i]over the long run.[i]

Once you have set it up just ignore it and earn a return in the long-run that should statistically
be close to that of the market overall. Do not worry with the ups and downs of the market at any particular time. You are in it for the long haul…enjoying average market return plus deferred taxes.

Try to use money that you receive above your max 401k contribution to do your real estate investing.

This scenario gives you a tremendous diversification of stock held companies as well as real estate to help balance the ups and downs of each market.

Ok…anyway…I think I have rattled on enough about this. Good luck to everyone here! I really love this site!


i appreciate your advice. i just don’t see a 401k as a viable money making option for me. i’d rather create a business that offers me pre tax options and a chance to control how large or small a return i want for myself, my investors, how much i will pay employees, etc…

deferred tax is great, until you actually get taxed and then badda bing! uncle same gets his.

question: what happens in 2012ish, when 450,000 people turn 70 1/2? or 2014, when another 500,000 turn 70 1/2? and then the over 700,000 that turn 70 1/2 in 2016? not to mention all the people turning 59 1/2, 62, and 65 now and over the next 6 years?

as these people pull out their money in their 401k’s and other retirement vehicles, to live off their “retirement” - what’s gonna happen to the stock market? that long haul investing could land you penniless if you don’t pay attention to the market. and with mutual funds, they ain’t stock or options. you can’t move those babies and when 10 “investors” are dumping them while less than 1 are buying them - you’re screwed. how much did people lose in 2002? i know people at work who lost ALL OF IT IN THREE WEEKS - we’re talking 250,000 - down to 35,000…and they’re in their late 50’s…

It’s just not for me. i’ve made up my mind on that. I’d advise anyone I speak to, against investing in the stock market, unless they’re experienced traders. and mutual funds - forget it! they are the biggest waste of TIME. your money just doesn’t work hard enough. mutual funds help dummie people down and keep them ignorant about their personal finances.

i hear where you’re coming from, but that’s a mantra that our society at large as bought, hook, line and sinker. the message: don’t worry about your finances, take out more debt, debt is good, debt is your friend and your mutual fund will provide for you in the future…yeah right - that’s a JOKE. the stock market was not created for people to manage their retirement. it was created for businesses to grow in a free market, not help people be stupid, throw money at it and provide for their retirement under GOVERNMENT REGULATIONS that require mandatory “dispursements”.

just my two sense. nothing personal.

lol, no offense taken! make some very valid points that I hear discussed quite often.

I guess that’s why I shouldn’t even broach the subject.

I left out lots and lots of things you must consider and one is to dramatically lower or eliminate your exposure to the stock market as you near retirement. I would like to retire with probably just some different types of bonds and the rest of my assets in real estate. This should be relatively safe.

By all means, if you want to invest solely in REI, that’s totally cool. I just don’t have as much confidence in my real estate decisions as new as I am to the field, not to diversify some. The only reason I even recommend either buying a well diversified portfolio of stocks and or mutual funds is to get overall diversification of all your assests while simultaneously taking advantage of the deferred tax.

However, If I was a seasoned real estate investor who usually never loses, I probably would feel differently. I might feel that my REI gains out way the beni’s of 401k’s. I am just not at that point yet.

I guess in the big picture, your portfolio must meet your individual talents, aspirations and circumstances…

It sounds like in your case you’ve got the aspirations and determination to make it happen. Go for it!!


You might want to talk to an insurance agent. This is a short clip from Douglas Andrews. when I was doing loans with Equity Fund they had an insurance product that paid dividends based on the Standard & Poor Index so you cuold get stock market returns without being in the stock market… From Missed Fortune

Mutual funds are still subject to taxation during the accumulation phase on dividends and capital gain distributions, as well as capital gains that may be realized during the withdrawal phase.

Wise investors are turning more to insurance companies for tax-favored, long-term savings and capital accumulation.

Investment-Grade-Insurance Contracts
The most unique feature of permanent life insurance contract is that under Sections 72(e) and 7702 of the Internal Revenue Code, the accumulation of cash values inside the insurance contract are tax advantaged.
Not only can the cash values accumulate tax free, but they can also be accessed tax free under certain provision of the contract.

Good Luck to your

Is there any way to take money out of these retirement accounts without getting a penalty for early withdrawl?

You need to speak to an expert on this but you can get a loan from your funds rather than having it as withdrawal. Call the administrator for
your 401K the can provide you some options

Definitely talk to the plan administrator. But in most cases you can take out a loan against the plan up to 50% or $50,000, whichever is less. You will only have 5 years to pay it back if it’s a “consumer loan” or 15 years if it’s for the purchase or improvement of a primary residence. **TIP: Take out the loan, record a lien against your home to secure the note, give that record to the plan administration office or whoever it is that’s helping you with that, paint your kids’ bedroom or something, and then take advantage of not only the longer pay back, but also the additional interest you get to write off that you are paying back to yourself (well, your retirement plan at least).

Thank you for this valuable information!