OT: What would you do with $3,000 for one year (@ 1.9% APR)?

[TC535i]

Just got this offer from my credit card... $3k for a year @ 1.9% Don't really want to spend it, since I can't really afford it... Not sure how much I can do by investing it... Not enough to make a signifigant difference to push me towards buying property...

Any suggestions? What would you guys do?

[MikeV]

Same as I always do, rip it up and toss it.

[winfred]

Ditto

[Black 535i]

Personally if nothing went wrong with my car by the summer I would put the 3K towards a new Colnago C-50 road bike with Campy Record 10-speed gruppo and pony up the other half myself. Wet dream come true.

[Rory]

Just got this offer from my credit card... $3k for a year @ 1.9% Don't really want to spend it, since I can't really afford it... Not sure how much I can do by investing it... Not enough to make a signifigant difference to push me towards buying property...

Any suggestions? What would you guys do?
It depends on what your current financial situation is. If you throw it in a 12 month CD you will not make enough in interest to make it worth your while. You are young so I would say think about investing it. What does the APR shoot up too after month 12? Do you or will you have the cash to pay it off at the end of the year? I would take a look at a couple small cap growth funds. If you are not up to the risk there are plenty of descent bond funds that will pay 4-5% return with low risk over the next year. You also have the option of any risk level in between. I am a big fan of the Royce Funds (www.roycefunds.com (http://www.roycefunds.com)). The Royce Value Trust (rvt) is still at a bit of a discount. It pays a very high dividend and will also give a solid growth year in and year out. Bottom line is that if you don't or won't have the tolerance to lose money or it will put you in debt I would think about ripping it up. But, you gotta start saving some where and you are only young once. We can afford to ride the waves of the market for now.

Disclaimer: YMMV, I am not a financial planner or do not claim to be an expert of any way. Just a normal guy in a sprint to graduation and retirement......blah blah blah

Good Luck,
Rory

[MikeV]

Um, no offense meant, borrowing money to invest in stocks or bonds is a time-honored way to either get rich or go bankrupt... but you don't get to control which one.
Look at the upside - you choose a good investment, it grows 15% this year, subtract the 1.9% you'll owe and you've cleared a total of... $423. Not bad. Or did you clear $423? Not really, 'cuz you are going to have to make payments over that year, say they are small so it's only $50/month, but that really means you only have $2400 to invest (well, something like it)... so you'll clear ~$315.
Hmm, but you have to buy (and, presumably sell) the stocks/funds, so you're looking at another $40 (minimum) down the drain. So, with a very good year (most years folks would kill for 15%), you would clear $315... before taxes. Hmm, so maybe $250 after taxes, best reasonable upside. Of course, if your investment gains 10% (still a great year compared to inflation), you'll only clear something like $125... and if it makes 5%, you're at $64 (5% would be a good year compared to the inflation rate of <2%).

OK, what's the downside? Well, there's no reason your particular investment can't lose, say 10% this year (unless you put it in short-term bonds, but if you do your upside will be limited to the 2% range). So, if you invest 2400, lose 10%, lose the buy/sell costs, you're out $280. Probably equally as likely as gaining 15% in this particular year (election, Iraq, weird economy, you name it).

So - if you want to flip a coin on a few hundred bucks, go for it.