Funds for Investing

Readers of generally fall into one of two categories. These are investors and “want to be” investors. The main distinction between the two groups is simply access to capital. Investing in the stock market was once viewed as something only the wealthy could participate in. With the abundance of online investing information and guides like available for free as well as a plethora of discount brokerages, the barriers to successful stock market investing have finally been lowered. Even though access is now available to the general population, the actual percentages of those who invest directly in stocks has not changed significantly over the past decade. The abysmal performance of the stock markets since 1999 have not helped this however the main culprit remains investors lack of cash.

Fortunately for most “want to be” investors there are several options available for accessing cash that can be used to buy stocks. Taking a cash advance on a credit card is one way to get quick access to funds. This is not recommended as credit cards usually charge high interest rates. The rates a particularly high on cash advances with rates second only to payday loans which should not even be considered. It would be near impossible to make a comparable rate of return in the stock market to just break even with the interest charges you would be paying. Some credit card companies will occasionally offer 0% or a very low % interest rate on balance transfers or cash advances. These offers should be taken advantage of however they are usually short term (6-18 months) so is not a long term solution to accessing cash for stock investing.
A better alternative is accessing cash through Home Equity Lines of Credit (HELOC) and REX Agreements. If you own a home and have good credit, you can take out a loan using any equity you have in your home as collateral. A misconception among most people about HELOCs or home equity loans is that the cash must be used for home improvements. This is not the case. The money you borrow can be investing in stocks without any restrictions. There are two advantages to this. The first is that home equity loans having some of the lowest interest rates available to consumers. The second advantage is the interest you pay on a HELOC may be tax deductable if you use the proceeds to invest in the stock market in which case your effective interest rate (after taxes) would be quite low indeed.

A REX agreement is a sort of alternative to a home equity line of credit or home equity loan. It is an intriguing alternative offered by an organization called REX & Company. Under the plan you agree to give them a percentage (usually 50%) of any increase in your home’s value when it is sold in return for an immediate up-front cash payment. Payouts range in value but the average is around 15% of the home’s appraised value. Rex Agreement reviews should be conducted to determine the actual costs and stipulations involved. The cash can be used for whatever purpose deemed necessary including investing in the stock market. This is an excellent alternative way to generate funds for investing.